Research & News
It’s time to rethink bond allocations
In this article, Jeff Benjamin of InvestmentNews explores why financial advisers might benefit by looking once again to institutional investors for guidance with fixed income now that bond yields are poised for a cycle of rising interest rates. Read the article here >>>
For bond fund investors, it may be time to bail
In this interview, Jeff Benjamin of InvestmentNews sits down with Brent Burns of Asset Dedication to discuss how the impact of the Federal Reserve’s plan to start dialing back the five-year-long quantitative easing program will change the risk dynamics for bond fund investors and how now may be the right time to bail. Read the interview here >>>
FPA Webinar – The Interest Rate Freight Train
Presented By: Stephen J. Huxley, PHD and Brent Burns
When: September 4th at 2pm EDT
1 CFP® CE Credit
About the Webinar:
Bonds and bond funds are not the same. As evidenced by the small rise in interest rates in May and June of 2013, the current interest rate environment exposes your clients’ bond fund holdings to significant risks. Learn how individual bonds can protect principal and generate predictable income even when rates rise. Register Now
Asset Dedication’s Reaction to the Belief that Fears over Rising Rates are Overblown
In this letter to the editor of Advisor Perspectives, Asset Dedication’s Stephen J. Huxley, PHD responds to Joe Tomlinson’s article, Retirement Portfolios: Fears over Rising Rates are Overblown. In Steve’s response, he discusses some the weaknesses of the underlying assumptions Joe Tomlinson uses when talking about bond funds in rising interest rate environments. Click here to read the letter >>>
Beauty of bonds lost in stampede to the exits
In Jeff Benjamin’s article, Beauty of bonds lost in stampede to the exits, he talks about how investors are losing sight of the need for a volatility buffer and may be leaving bonds for far riskier bandwagons. In the process, Jeff quotes our own Brent Burns saying “For the folks who are really trying to find noncorrelated and less volatile investments, bonds fit that profile, and people own bonds because there is some kind of financial plan, whether it is stated or not,”. Read the full article here >>>
Interest Rate Freight Train
In May of 2013, a small rise in interest rates highlighted the risk that bond fund investors face in their “safe” investments. The relationship between interest rates and market risk is clear. The mathematical relationship is straight forward. When interest rates rise, the value of bonds goes down. For bond funds, rising rates means that total return has to fight the headwind of losses on the underlying portfolio. As NAV declines, coupon interest generated by the bonds in the portfolio may or may not be enough to overcome the price loss. On the other hand, making the same fixed income allocation to high quality individual bonds and holding them to maturity is a clearly superior strategy when rates rise because it can protect principal and avoid losses in a way that bond funds cannot. Download the white paper >>>