The new rules of investment, post financial crisis, have investors giving bonds newfound respect and questioning even the safest investments, the Associated Press reports.
As Bell Rock Capital Chief Investment Officer Cassandra Toroian put it, “Gone are the days when a 5% to 7% return is viewed as too small. People are willing to take a handful of singles as opposed to trying to get one big home run right now. That mentality will take years to come back.”
One of the key takeaways from the recession is how well bond funds have done. Since October 2007, when the recession first began, the Barclays Capital U.S. Aggregate Bond Index is up nearly 14%, whereas the Standard & Poor’s 500 is down 28%.
Going back over the past five years, bonds rose 5% a year, compared with stocks’ 1% gain, and over the past decade, bonds rose 6.2% a year, compared with stocks’ annual 0.5% loss.
Year-to-date through August, investors have put $209 billion into bond mutual funds, compared with a mere $16 billion into stock funds.
Added to this, many experts expect the recovery to be shallow and volatile, making it difficult for investors to confidently select growth or value stocks. Thus, some financial advisers are telling their clients to move some of their money into real estate or gold.
In addition, they are warning investors that there is no such thing as a truly risk-free investment, as proven by the Reserve Primary Fund, which broke the buck a year ago.