Investors dumping out of bonds

Bernanke's tapering talk spooked investors.

NEW YORK (CNNMoney)

Federal Reserve chairman Ben Bernanke's recent announcement that the central bank could start pulling back on its bond purchase program later this year spooked investors, who yanked a record $80 billion out of bond mutual funds and exchange traded funds through June 27, according to TrimTabs.

While Stebbins has been following the Fed news, he has been standing pat.

The 63-year old, who has been semi-retired for nearly a decade, invests less than a third of his and his wife Debbie's nest egg in bonds, while a majority sits in stock mutual funds and annuities.

"Given where interest rates are, we've understood for awhile that a bond portfolio is not what's going to get us through the next 10 to 15 years," said Stebbins, who was an executive at a flavor and fragrance company until he retired in 2004. He still consults for various private equity firms within the industry.

"I've always been bullish on stocks over bonds over a long-term period, and because of our continuing income, we can afford to be a bit more aggressive," added Stebbins, who invests through Gary Goldberg Financial Services.

Many of the firm's clients have light exposure to bonds.

"We looked at bonds and made a fairly early call that they've become a very risky asset class as a result of artificially low yields that have been pushed down by monetary policy," said Oliver Pursche, president of the Suffern, N.Y.-based investment advisory firm.

The firm has been bearish on bonds for the past year and a half.

Even for retired and semi-retired clients like Stebbins, Pursche said it doesn't make sense to hold long-term bonds because they will lose value as interest rates rise from their record low levels.

During the past two months, the iShares Barclays 20+ Year Treasury bond fund (TLT) has declined nearly 11%. At the same time, the 10-year Treasury yield has climbed to 2.5% from 1.6% in early May.

For clients like Stebbins who can withstand a bit of volatility, Purshe invests in short-term bonds to dampen the ups and down in his clients' portfolios, but largely relies on high quality dividend paying stocks, such as Verizon (VZ, Fortune 500), AT&T (T, Fortune 500) and GlaxoSmithKlein (GSK), to generate income and deliver returns.

Pursche thinks the recent flight out of bonds has been exaggerated by fears that bonds will collapse when the Fed begins reversing its stimulus programs. He said it's important for investors to realize that bonds are "very overvalued," and there's not much room for prices to appreciate and yields to fall.

Given that backdrop, he wondered what took so long for investors to finally start pulling money out of their bond funds, and said there's still more room to go.

While the recent withdrawal reverses nearly three-quarters of this year's inflow into bonds, it doesn't even make a dent on the $1 trillion investors have plowed into bond funds since the financial crisis.

First Published: July 2, 2013: 8:04 AM ET

Anda sedang membaca artikel tentang

Investors dumping out of bonds

Dengan url

https://ponselkuirit.blogspot.com/2013/07/investors-dumping-out-of-bonds.html

Anda boleh menyebar luaskannya atau mengcopy paste-nya

Investors dumping out of bonds

namun jangan lupa untuk meletakkan link

Investors dumping out of bonds

sebagai sumbernya