Jay wrote:
My investment in bond fund had been losing money in recent months but
I guess, this is more to do with interest rates. How about the
"Subprime Problems"? -- Will the prices of Corporate Bonds and in turn
the value of my bond fund go down if the Subprime meltdown continues?
The yield on long-term bonds (like 30 year Treasuries) tends to rise and
fall with projected inflation rates. When inflation picks up, the yield
on Treasuries has to rise to compensate for the reduced value.
I don't see how a subprime meltdown can cause inflation to increase. If
anything, it might trigger an economic slowdown and help cool inflation
pressures.
One more thing: If you're worried about your bond fund "losing money,"
then maybe you should not be invested in bond funds at all. A bond is
generally not a growth investment; the purpose of a bond is to enjoy the
income it generates from its yield.
The only time you can invest in bonds for significant growth is when
interest rates or inflation rates have been high but are now falling
sharply. As was the case from 2001-2002. But not now.
An alternative is equity-income funds. These funds invest in
dividend-paying stocks. VEIPX is paying a yield of 2.53% with a total
YTD return of 6.63%.
--
Steven D. Litvintchouk
Email:
sdlit...@earthlinkNOSPAM.net
Remove the NOSPAM before replying to me.
