Wednesday, September 21, 2011

Will Bond Funds Be the Best Investment For 2011?

Investors who bet that bond funds will be the best investment for 2010 have not been disappointed with their investment choices. Because smart investors look down the road six months or more to beg the question:? Bond funds will be the best investment for 2011 and what are the risks


just look at average annual rates of return for the 3-year period ending in mid-2010 helps explain the popularity of bond funds. Money market funds paid between 1% and 2% per year on average, pay almost nothing for the past 12 months. Stock funds, a wild ride with many of them lose 10% per year or more. Many high-quality bond funds returned more than 6% per annum. Under one possible scenario of their income could be the best investment for 2011, or at least the best mutual funds. But do not ignore the risk factor.


bonds offer a fixed annual income based on a fixed interest rate that never changes for a lifetime investment. When you own shares in a bond fund you own a small part of a large portfolio of income producing securities, which trade on the open market like stocks do. Your total return on bond funds, including interest income and gains or losses in the value of the securities in the portfolio. Therefore, the risk factor.


Bond funds are also referred to as income funds, because that is their main attraction ... higher interest income than they can get from other popular investment options or other mutual funds. They are good investment lately, and the best investment for 2010 for investors looking for higher returns without higher risk. There are two main reasons for this. Interest rates are lower, and inflation is tame. Falling interest rates make fixed-interest revenue from existing or older bonds more attractive than the new issues coming to market. Investors bid price (value) of bonds on the market because they are willing to pay more for higher income.


Lower inflation makes bonds with fixed income payments more attractive as a future purchasing power will be significantly diluted by the higher cost of living. Negative inflation is called deflation, where prices of goods and services is actually declining. If interest rates continue to fall, and inflation followed suit and / or go negative, bond funds are a candidate for the best investment for 2011. Some economists and professional money managers believe that this scenario would definitely happen.


On the other hand, interest rates are currently near historic lows for at least part of the government's efforts to get low rates to stimulate a lackluster gospodarstva.Pitanje is whether or not to be able and / or the market will push interest rates in 2011? When rates go up in inflation generally, and it's a formula for losing money in fixed income investments such as bond funds. Higher interest rates and inflation to fixed income from securities less attractive. And investors in the bond market sent prices of bonds fall in sales of


Income funds are some of the best mutual funds in the last 10 years and three years, when things were dicey for stocks and stock funds. Do not assume that this trend will continue. Look at the economic and business news. If interest rates continue to creep down and inflation remains low and turns negative (deflation), bond funds could be your best investment for 2011 and beyond. If the opposite occurs it's time to lighten up, or avoid bond funds together.

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