Bond-Fund Buy Sell or Hold 1-888-815-5116 EXT 725

Fund Alternative to Us Bond

 Bond-fund selling is a question that is different for every investor, the reason being is every  bond-fund performs different and every investor has their own investment goals.   So what is  the right answer;  it depends on the portfolio and the investors goals.  To make more sense of  this question, we need to understand why bond-fund investors sell off bond-funds.

Why sell off bond-fund  

  1. Interest rates are likely to increase. When interest rates increase, the value of existing bonds decline. This is because investors will be able to get a better interest rate purchasing a new bond. So if you bought into a bond-fund recently looking into an alternative fixed-income fund maybe a smart move for your portfolio.

Think of the sharp end of the pencil as interest rates and the eraser end as bond prices. If you increase either one, the other drops. When interest rates rise, bond prices drop. When interest rates fall, bond prices rise.

  1. Inflation increases. The real rate of return on a bond is the difference between the interest it pays and inflation. If inflation increases, bonds will become less attractive since their interest rates do not account for inflation. Inflation also increases the demand for labor, and therefore reduces unemployment. This allows consumers to buy more goods and drives returns earned on alternative fixed-income fund
  2. Bonds are more likely to default. When a lender is at risk of defaulting on a bond, the demand for that bond goes down significantly. The price of bonds is fixed by supply and demand just like any other asset. You can follow Standard & Poor’s (the S&P) regarding changes in the credit rating of various bonds and news on whether or not a bond is expected to default. CORI LLC’s alternative fixed-income fund investors are secured by real estate a fixed asset; bought 70% below current market price. Making default’s worst case scenario you get your money back by selling the real estate off.
  3. Institutional and foreign demand for bonds is declining. Most bonds are sold to large institutions and foreign governments. When these organizations have less interest in purchasing bonds due to declining yields or higher perceived risk, the value of those bonds can decrease dramatically.

The U.S. economy is likely to continue its recovery next year, with growth of 2.5 to 3 percent, says Nick Colas, chief market strategist of Convergex brokerage in New York City. Meanwhile, the European economy is still quite weak, he notes. And while small-cap companies typically earn most of their revenue domestically, larger companies generate 20 to 30 percent of their revenues from European countries, Colas says. “That’s a tough hole to fill in 2015. It looks like there will be a triple-dip recession in Germany,” he says. In addition, the Russell 2000 small-cap stock index has underperformed the S&P 500 this year, he points out. While the S&P 500 has returned 12.4 percent, the Russell 2000 has returned only 2 percent. For all of these reasons,

“investors have to focus on smaller companies with more exposure to the U.S.,”

Colas says

In addition, interest rates are expected to rise in the near future. (The Federal Reserve decided not to raise interest rates in June 2015, but comments Wednesday 6/17/2015 suggests the long awaited rate hike could come in September according to CNN Money .) When that happens, bond prices will almost certainly decline. If you are holding bonds for their interest, and you recently have bought them, it seems likely that your interest rate being earned is quite low. What will happen when rates go up? You will still be earning a low rate and losing money. In that case, it seems prudent to sell some portion of your bond-fund — perhaps even all of them, if they are ultra-safe and ultra-low-interest-earning, get into cash, and start looking for a future opportunity to buy a bond alternative. Selling now will most likely give you the biggest capital return on the sale; remember, the prices will drop when rates go up. However, if you have bonds from a while ago, when rates were significantly higher, you are earning good interest from them. It wouldn’t make much sense to sell them now, UNLESS you anticipate a need for cash in the near future (or, at least, before you think rates will rise significantly, hurting your bonds’ sale value).

In general, rates for traditional fixed-income investments have been horrible and aren’t getting any better. But there is light at the end of the tunnel. You just have to look in a different tunnel. Achieving a higher rate of return on fixed income is always possible, but you must be more flexible than in the past. The traditional fixed-income investments like CDs, money market fund, and bond-fund investments  are not the place to look for yield. The real place to find higher income is in the “alternative fixed-income” space—lesser known investments that don’t follow the mainstream rules of fixed income, and don’t have all of the same qualities. Non-Public Real Estate Investment Trusts (REITs). These are not the traditional REITs that trade on an exchange. Public REITs are too volatile. Private REITs typically perform steadily and are currently providing mid to high single-digit dividends. Again, do your homework. Consultant with your professional financial planner, attorney, or CPA before you sell your bond-fund.

For Information on Bond-Fund Alternatives

call 1-888-815-5116 Ext 725

Bond-fund SFH on $


About corillc

Central Ohio Real Estate Investment LLC - CORI LLC provides honest solutions for OH house sellers; who need to sell fast. We are a local Franklin County home buying service, located at 1900 Polaris Pkwy STE 450-048 Columbus OH 43240. To Learn How to Sell Your House Fast Call 614-412-4403 We help investors with their goals, to grow their portfolio for better returns. Call 614-333-0546 for more Info Columbus Residence can become homeowners with our owners finance program. We have a licensed Realtor on staff to help you with the home buyer programs. Call 614-412-4106 to find out How All the transactions that Central Ohio Real Estate Investment LLC participates in is handled by a licensed Realtor Roger Loesel with Ditter & Associates. Roger's Bio Roger Loesel is originally from Michigan and after graduating from high school went into the US Army Infantry program. Roger excelled in the program and was chosen to enter the US Army Ranger program and was stationed at Hunter Army Air Field in Savanna GA. After 4 years of active service in the Ranger program Roger retired and moved to Ohio. In Ohio Roger attended Northern Kentucky University and studied Marketing. In 2009 Roger Loesel got his Ohio Real Estate license and specialized in working with Columbus OH Home Sellers, individuals looking for a better return in Franklin County and Columbus Residence wanting to be home owners.

Get More Real Estate Market Info... Subscribe Below!

Learn more about CORI LLC and find other resources on buying Central OH investment properties with us. Like us, follow us, connect!

, , , , , , , , , , , , , , , , , , , ,

No comments yet.

Leave a Reply