On Forbes: Help Navigating Changing Bond Markets

February 26, 2013

FundX president Janet Brown aims to help investors navigate changing bond markets in her latest post on the Forbes Intelligent Investing blog, “5 Reasons Why Bond Funds Can Help You Navigate Bond Market Headwinds Successfully.”

Bonds have done well for the last few years, but some are now questioning if this will continue. “No one can know for sure what the future holds,” Janet writes, “but we do know that bond markets, like stock markets, do change over time, and what works in one market environment may not work in future markets.”

Janet offers three ways investors can prepare for changing markets:

1. Actively manage your portfolio – “Some investors see changing markets as a problem, but for active investors, changing markets can be an opportunity,” Janet explains. She offers examples of how active investors can respond to changing markets: “If interest rates rise, active fixed-income investors could invest in short-term bonds, which tend to remain fairly stable in rising rate environments, or floating rate funds, which are more insulated from the negative impact of rising rates. “

2. Invest in bond funds rather than individual bonds  – “I believe the most effective way for investors to actively manage their portfolios is to use mutual and exchange traded funds. Funds make it easy to move from one area of the market into another,” Janet writes.

3. Consider lowering the duration of your portfolio – Janet writes that she’s recently replaced some intermediate-term holdings with “bond funds like PIMCO Income (PONDX) and Osterweis Strategic Income (OSTIX), which have a broader spectrum of fixed-income that they can invest in,” Because these funds have lower duration, “they offer a little more protection in case interest rates were to rise,” Janet notes.

(To read all of Janet’s posts on the Forbes Intelligent Investing blog, click here.)

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