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.