Is It Time to Sell Your Bond Funds and Go Into Money Market?, #160
With 2022 being one of the worst years ever for bonds, many listeners are asking if they should dump their current bond fund and move to something more stable? On this episode, I’m exploring the performance history of bonds, the relationship between bonds and interest rates, and whether you should sell your bonds and invest in a money market fund.
You will want to hear this episode if you are interested in...
Exploring the history of bond performance [1:57]
Understanding the relationship between bonds and interest rates [3:23]
Should you bail on your bond fund? [5:03]
Understanding the past and current performance of bonds
The Barclays Aggregate Bond Index has been used to track bond performance since 1976. In 2022, the Barclays Index reported a 13% loss making it the worst year for bonds in U.S. history. The second worst was a 2% dip in 1994, but that pales in comparison. Bonds are supposed to protect our money. So how could they experience such a large decline?
The answer lies in the relationship between bonds and interest rates. Just like stocks, bonds trade daily, and much of their value is dictated by interest rates. Bond prices and interest rates have what's known as an inverse relationship. Meaning if interest rates go down, bond prices go up. And vice versa! When interest rates rose a record 7 times in 2022, it caused massive losses to many people invested in bonds. So the big question is, should you get out of your bond fund and into a more stable fund like a money market fund? Listen to this episode to find out!
Resources Mentioned
Connect With Morrissey Wealth Management
www.MorrisseyWealthManagement.com/contact