What Is In Your Short Term Bond Fund

| March 11, 2018
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It is not just individual investors who reach for yield. Bond managers often reach for yield thinking they can outsmart the market on rates and increase the income without sacrificing volatility and/or potential losses.

According to Morningstar, nearly 90% the top quartile short-term bond funds over the last three years act more like traditional, intermediate-term bond funds.

How so?

Well when you reach for yield, you have to pull on a few levers. One would be length of your maturities; however, since these are short-term bond funds this is somewhat limited.

So the next best option is to increase credit risk.

Of these top short-term bond funds, nearly 40% of the assets were in high-yield and bank loan funds. Read as below investment grade.

You also have 15% in Emerging Market Debt and ‘Other’ which could be non-rated bonds or structured products.

Either way, buyer beware and when you want to build-up cash don’t get cute.


Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O


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