Bond funds are losing a ton of money since interest rates are rising and bond prices are falling. Many investors are moving their money out of bond funds. A record amount of money was moved out of bond funds in June. I have moved my money out of bond funds as well but I probably should have moved my money out of bond funds a few months ago. Since I knew that my bond fund would decline in value when interest rates started rising again and I knew that interest rates would eventually have to rise I switched the bond allocation of my portfolio to a short term bond fund to lessen the eventual loss. If I would have instead moved my money completely out of bonds and into a money market fund I would have saved myself several hundred dollars. Of course, it is always easier to see what the correct move is in hindsight. I’m not a proponent of market timing in general, but since it seems likely that bond funds will continue to decrease in price for a while I’m staying out of them until I think they have bottomed out or are at least close to bottoming out.
I need to figure out what to do with the bond portion of my portfolio. I currently have it in a money market fund. That is not a great option though, because the fund is paying basically 0% interest. The only thing having my money in a money market fund does for me is ensure that I don’t lose money. Although I’ll still be losing money when inflation is taken into consideration. I don’t want to have 100% of my money in stocks so I’m not sure where else to invest the money. Unfortunately, the bond portion of my portfolio was in my IRA with a mutual fund company and they have a limited selection of funds available. I’m thinking that I might put that money into a stock mutual fund and use my TradeKing.com account to invest new money in something other than stocks or bonds. What do you think I should do with the bond fund money? Invest in stocks, leave it in the money market fund, put it back in a bond fund, or something else?