Well, I'm not sure he meant that statement literally -- he was perhaps using a bit of hyperbole to make the point that bond funds/etfs have become quite risky because the "dividend payment" (aka interest payments) have become rather anemic and investors are left with having to count on share appreciation to realize meaningful returns -- and that's becoming more and more of a high odds gamble. Sound like stocks, these days? Yep.
Sorry Browser, but this doesn't make much sense. Investors don't "count on share appreciation", they adjust their expectations down. Which is why you hear them grumbling
about the low fixed income returns, as opposed to "well, the dividend is low, but nevermind I'll make the missing returns from share price".
Even if some were thus misguided, it would not make the funds "like stocks". It would just make those investors misguided. Bond funds who don't venture too far aways from A's will continue to be much, much safer.
I will also extend what nisiprius said and say that whenever someone talks about "bond funds" as a separate category from "bonds" without mentioning a specific risky one, that's bull. You can use it as a litmus test. They want your money, they want the publicity, they're talking down to you because they think you don't like to see actual bond values moving around, or in extreme cases they don't know what they're talking about.
Now is it the case that some fund / portfolio managers, despondent at the prospect of having to extract 1%+ fees from 1.6% safe yields, have ventured into territory that's a lot more stock-like? Absolutely. Use good judgment.
Browser wrote:Are bond funds really going to help you cushion the risk of stocks as effectively as when bonds had much higher yields, and is the "conventional wisdom" about owning bond funds as valid as it used to be? Probably not.
Probably not, but you might still be surprised. We haven't yet seen negative yields here, but others have.
Browser wrote:If you can realize the nominal yield of a treasury with 15-20 year duration with an FDIC-insured CD with no term risk, why would you want to own the treasury and be exposed to that risk?
Mostly because you're a large investor, or one with only a 401k, and can't access that FDIC CD. This still means 90%+ of the money out there. For me, it's also because it's hard to get rebalancing money out of CDs and I have some duration budget to spare because of those CDs. But this is only at the margins.