Retirement investment with little risk but rewarding returns
Would you recommend the Hoisington U.S. Treasury bond fund for retirement accounts? (WHOSX) Their annual
average returns seem excellent with little risk and high long term results.
Terry Says: What I am about to say applies to ALL long term bond funds. The “returns’ have looked good, because when interest rates fall, bond PRICES RISE! So in addition to getting a small yield, you also get some price appreciation built into the total return of a bond fund — when rates are falling. BUT when rates start to rise, you are in a fund that becomes less appealing. After all, it is chock full of long-term, low interest rate bonds — even from the best country in the world! People will start selling the bond fund because when rates rise they can find other, higher-yielding things to buy. So the price of the bonds will drop — and so will the TOTAL RETURN of the fund!