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Is Bond Investing Dead?
Bond investing returns are among the lowest of the major asset classes. The current economic environment is making it much more difficult to recommend bonds as an investment.
Why Invest in Bonds?
Investing in bonds traditionally has been appealing to reduce risk from a falling stock market and to provide predictable returns. Bonds have always been thought to maintain their value and often rise during bearish stock markets. Bonds are traditionally much less volatile than stocks.
But this is the one-year chart of the performance of the Vanguard Total Bond Market vs Vanguard Total Real Estate, the S&P 500, and Vanguard’s International Stock Index ETF.
And even more concerning, the last 5-year return of BND…
There is a negative return over the last 5 years!
Bonds are basically an investment into funding debt for a government, corporation, or other business entity. Go here for a primer on bonds.
For your investment in bonds, a fixed return is promised (assuming there is no default). It always has been considered a “safe” investment and great for capital preservation.
