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A record-setting $375 billion flowed into the $2.2 trillion bond fund industry in 2009, while equity fund assets lost $40 billion last year, to end at $3.7 trillion. Those gushing inflows from unnerved investors and a growing consensus the
Some believe investors would be better off in shorter-term fixed income instruments over the next five years and then moving into stocks that will undoubtedly benefit from a higher interest-rate environment.
Other industry insiders point out that few fund managers have closed their bond funds to new assets, which they at least did with technology funds at the end of the dot-com mania: “I worry that some of the opportunities afforded the mutual fund industry to learn from the past may have faded away too soon," T. Neil Bathon, founder,
But investors can only think of the devastating stock market years of 2000 and 2008—and so they continue to pour into bonds and bond funds, The Wall Street Journal reports in today's “Fund Track” column.
“It’s fallacious reasoning that you can’t lose money in bonds,” James Swanson, chief investment strategist at
“People are conditioned to push the ‘fixed income’ button because for nearly 30 years you didn’t have to do anything to make money,” noted Bill Eigen, portfolio manager of the J.P. Morgan Strategic Income Opportunities Fund.
“A multiyear move of rising interest rates is an environment that most people haven’t seen before,” added Tom Atteberry, co-manager of FPA New Income Fund.