Nor did increasing flows of retail money into both loan and bond mutual funds.
Declining rates pushed up the value of bond investments, delivering an average 9.3% return for Treasury bond mutual funds.
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The example of bond mutual funds, which suffered huge redemptions because of a bear market in corporate bonds, suggests not.
In addition to diversifying holdings, most municipal bond mutual funds offer an option for dividend reinvestment, so returns can compound over time.
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Bond mutual funds appear to be the biggest benefactor of the inflows accounting for 68% of the fund inflows thus far in 2010.
One of the most pronounced changes in investor behavior since the crisis has been growth of savings invested in bonds and bond mutual funds.
Bond mutual funds that invest in mortgage-backed bonds prefer investment grades.
Withdrawals that didn't go directly into stock or bond mutual funds could have gone into bank accounts, covered daily expenses or been used for other needs.
The launch of the Pimco Total Return Exchange-Traded Fund will test the mettle of investors with trillions of dollars invested in traditional bond mutual funds.
FORBES: Pimco Total Return ETF Shines a Light on Transaction Costs
The cure for such over exposure is a simple one: whether they are bond mutual funds, ETFs or separate bonds, sell some of those bond investments!
Returns on bonds have been strong and steady over the past couple of years, and investors have flooded cash into bond mutual funds and exchange-traded funds.
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Yet inflows into checking and savings accounts outstripped inflows into stock and bond mutual funds and ETFs in every single month of 2011, including in tax season.
In fact, Morningstar categorizes more than 60 municipal bond mutual funds as intermediate, of which several use one of the BarCap Municipal intermediate indices or similar index as a performance benchmark.
FORBES: Put Intermediate Muni Funds In Your Portfolio's Rotation
Banks and advisors have been hawking muni bonds as the next-to-last safe haven, just a notch below Treasuries but with much better yields: as much as 7% tax-free in some muni-bond mutual funds.
Joe saves this same amount annually until age 70 and earns an average compound annual return over that time of 6% by investing in a balanced mix of low-cost stock and bond mutual funds.
So while the typical effective duration -- a measure of sensitivity to interest rates -- for global bond mutual funds run by peers is five or six years, his is less than two years.
According to the latest report from the Investment Company Institute, investors bailed out of bond mutual funds last week for the third straight week, and the exodus accelerated to the fastest pace since October, 2008.
Typically mutual funds is where we are looking at quite substantially right now for really one reason, and those tend to trend better with a lot less risk, so you know you can have market-like rate of return on high-yield-bond mutual funds with historically a third of the downside risk of the markets.
The outflow of money from stock mutual funds finally reversed to inflow in October, while the inflow of money into bond mutual funds has reversed to outflows over the last four weeks, and accelerated last week in the largest weekly bailout from bonds since October, 2008 (which took place just before bonds began a huge rally in November, 2008).
Trillions of dollars have entered into the bond market through mutual funds over the past decade, as investors sought safety after the equity bear markets of 2000-2002, and fueled further by the broad stock market collapse in 2008.
Indeed, investors looking to close the gap should be buying mutual funds, whether they be stock or bond funds, for the long term.
Before investing spare dollars for retirement in mutual stock and bond funds, or buying complex insurance products that are subject to market risk, those 25-year-olds should first focus on savings.
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Inside it, ING was selling variable and fixed annuities, which are mutual funds and bond-like investments wrapped in life insurance that, in policies like ING's, cost several times more than low-cost alternatives and provide minimal coverage.
Mutual fund sales of bond funds actually peaked almost a year ago, although sales do remain high.
The melt-up into equities will continue as long as investor cash exits bond funds and U.S. Treasuries, and flow into equity mutual funds.
Savings and preservation of capital are paramount, and you can see the evidence as investors continue to flee equity mutual funds in favor of bond funds.
Beijing also has opened the door wider for foreign investors to access the domestic bond market, though Chinese banks and mutual funds still make up the biggest chunk of buyers.
For all of last year, and most of this year, even as the impressive new bull market in stocks continued, investors pulled money out of U.S. stock mutual funds at a dramatic pace, and poured money into bonds and bond funds as a safe haven at a near record pace.
It has been commonplace to hear, after years of mutual fund outflows from equities into bond funds, that money has begun to flow in the opposite direction.
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