Investing 401 - Bond Fund inflationary Times??? I currently have a mixture of various equity funds.
What I do not have is any obligation at this time.
The question I have is if I think we're heading into a period of inflation and I think interest rates will rise, is this the time to spend some $ $ $ in bonds?
I know that the decrease in bond values as yields rise. I also know that the Fed could fight against inflation by raising interest rates.
If I buy into funds now, would I expect from values to decrease if interest rates rise?
Thank you for your opinion.
It is generally good to have a certain amount of links in your asset mix. (The usual recommendation is 0% for very young children to more and more as you get closer to retirement.)
However, is probably not the best time to start. Generally bonds decline in value of interest rate increases, what happens probably start fairly quickly (maybe).
However, if you want links, if you're choosing a bond fund short-term, they are much less affected by the general interest rate environment. In the prospectus of the [bond fund s], it will describe the typical or average duration of securities held.
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PS FBIDX is a medium-term fund of 4.4 years average duration. LSBDX is a little more difficult to classify because they have such a wide range of investments in bonds, but has a longer duration (7 years). I had to wait before investing in bonds, if I were you, but later (maybe next year), there is nothing wrong with investing in one or the other.
There is a bond fund that would in particular increase in value as inflation rises. Tip It is an index fund that invests in inflation protected bonds. There are other similar, but it is the best known. In general, however period of inflation are not good at all for bond funds and so the share value declines as interest rates rise.
How many years until retirement?
What are bond funds?
These issues are more important than a straight yes / no on your other questions ... that my answers are as follows:
No.
Yes.
direct ownership of Bonds TIPS may be useful to some consideration, if offered in your plan.
A good plan low-cost money market (Vanguard Prime Money Fund is the model) is a necessary component of any good 401 (k). If more than 29 y / o and less than 60 years, all things being equal, an allowance of 5% -10% to a massive fund money may be all the exposure to equities not you need.
A retirement account should always have some fixed income component. Take a look at the asset allocation of funds for various retirement date mutual. This will give you an idea of what they consider a good mix.
Posted on January 9, 2010.