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Pimco in particular - my dad has shares and now is wondering if he should sell in an effort to stop even more losses. He has a 10 year timeframe until he requires any of it.

I know nothing of bond funds except googling Pimco and seeing the 'negative' articles.

Any opinions?
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I believe that almost everyone should have some bond exposure. The important consideration is the allocations to stock vs. bonds.

Bob
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I assume you mean Pimco Total Return.

If so, he could simply move to the Pimco short duration fund until rates stablize. I assume he is in this for diversification and downside protection, and not for the income it generates?

If he is in it for income, I would probably look elsewhere entirely (something like Franklin Income or other similar fund).
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nagdabbit,

You wrote, Pimco in particular - my dad has shares and now is wondering if he should sell in an effort to stop even more losses. He has a 10 year timeframe until he requires any of it.

I know nothing of bond funds except googling Pimco and seeing the 'negative' articles.


Pimco is well respected in the bond community. Their founder is Bill Gross. Pimco has nearly $2T under management across all of its bond funds.

With that said, bond rates have been rising since May and most government and investment grade bond values have been on the decline since. There is little Pimco can do about that. Bond values tend to follow interest rates inversely and since Pimco funds tend to be well diversified, they will tend to follow this rule.

The questions you have to ask yourself is, Will interest rates rise from here? When? And how fast?

My answer is, Probably yes. But I don't know for how much longer or how fast.

I think now is probably not the time to be buying bonds. But I'd be leery of dropping all of my exposure. With 10 years to go, I'd make sure I still have plenty of exposure in equities.

- Joel
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Thanks so much for the replies...

Yes, it's Pimco Total Return Inst. - he also has individual stocks and an S&P Index fund, but weighed more towards Pimco - maybe about 75% in it.

Good to know they are well respected, he's has said that he's done very well with it in the past...thanks for explaining the interest rate connection in relation to investment grade bonds - I'll pass on - he's just getting nervous (probably because they have done him well for a while)

nag
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Bonds have been on a 30 year bull market. As interest rates fall, bond prices tend to rise and vice versa. We have seen rates go from 13% and higher basically down to zero. The question is how much upside is there in bonds when rates are this low.
The question is when and how quickly do you expect rates to rise. As rates rise, bond prices tend to fall. Think of it this way, If you own a Bond that pays 5% interest, and then interest rates go to 7%, no one will want to buy your bond that only pays 5% because they can get a new one on the market that pays 7%. So, in order to make your Bond attractive, you have to discount the price to make it more appealing with the lower interest rate.
Not all Bonds are subject to this, so the question may be, What types of Bonds should I own.
Those with lower credit quality tend not be as sensitive to interest rate moves
Bonds with Shorter term maturities will not react as much to rate changes
International Bonds may be attractive because interest rates are not as low in other countries as they are here in the US.
Senior Floating Rate Notes, or Bank Loans, adjust their rates with interest rate changes and therefore tend not to be impacted by rate changes.

Bill
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