Business Marketing Magazine Summer 2017 January 2016 Creating Clear Businesses | Page 39

more (see below) . For all intents and purposes, the ease in getting added value as the FED dropped rates since the 80s is done and gone. * be predestined to ZERO, ZILCH, NADA total returns from standard bond funds in 2016even longer. Yes, one can opt for high yield bonds (which have tanked recently- also the illiquidity is a problem), overseas offerings If you have been alive recently, you (currency exposure), etc. but you must adknow that FED Chairman Yellen has now dress the higher risk. I am addressing plain flipped the switch for increasing rates vanilla bond funds. (12/16/2015). They will need to go up for So what’s my problem with Target Date many years- probably a decade or more. Funds? Same as above but even potentially Current Standard bond funds (no leveraggreater risks as years/decades go by with ing, overseas offerings, low ratings) will suf- the preprogramed increase of “less risky” fer in value. (The impact will vary according bonds. The initial intent, quite obviously, to ratings, maturity, yield and more). was exactly the opposite (pre bond bubble Times have changed thinking). Further, I have looked at some If you use certain advisors or software major offerings and it is next to impossible (tough to understand what they are comto figure out just exactly when changes in puting internally) they may still suggest the percentages of bonds may occur intersomething like the proverbial 60/40 split nally (manager discretion in view of ecoallocation (60% equities; 40% bonds). (Per- nomics), how they pay out and more. No sonally, I thought the 60/40 split was a cop- matter the details- investors are engaging out to more formal work.) Anyway, you still in potential zero returns and losses as rates may see a ‘decent’ chunk of bond funds sug- increase- the FED must continue on its path. gested for portfolios to, supposedly, lessen I expected some entities (potentially the Derisk (they would go down less than stocks partment of Labor which oversees 401ks) in a bad economy) and provide reasonable/ demand that 401k investors and more be good yields (5%+). So how well did they do made aware that the idea of a better future in 2015??? (Through December 22; year to with TDFs and no headaches is pretty much date values on selected funds by Vanguard. a sham. But the caveats have not been ofVery low expenses, no load and WYSIWYG fered to date and it appears that investors (‘what you see is what you get.’) must now research this product and decide Vanguard Long Term bond if the marketing of ‘lower risk’ will occur. -3.27 I think not. Intermediate term Investment grade *The article is written with a certain focus 1.41 which may imply that there will be some Intermediate term treasuries consistency in FED increases and more. Not 1.53 so. The world economics have developed Long term treasuries into fragmented pieces which will cause -1.12 some major volatility and calamities as the Short term bond years go on. Even in 2016. You have to be 1.04 prepared. I just do not think that the issue The low expense are nice, the lack of loads of bond risks have been properly identified is good, but the end result is that you may to the middle class American consumer.