Retire at the Coffeehouse: Chapter 4: Intermediate-Term Gov. Bonds
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» bob90245 - Chapter 4: Intermediate-Term Gov. Bonds
.Next, let’s take a look at the annual returns for intermediate-term (5-year) government bonds. Again, the data comes from Ibbotson.
<img src=http://www.geocities.com/bob90245/BondsA...>
Figure 5 shows the combined results of income plus capital gain or loss. (The principle value of a bond will rise or fall with changes in interest rates.) An investor holding an intermediate-term bond mutual fund would likely experience similar volatility. Over the entire period, the average annual return was approximately 5%.
Figure 6 shows a histogram of the returns shown in figure 5. Eight out of the 78 years in the study (or 10%) had negative returns. Fortunately, an investor wishing to eliminate volatility in the bond component of their portfolio can easily do so. This can be accomplished by constructing a bond or CD ladder. Bankrate.com has an article on how to construct a CD ladder. Click here to learn more.
-- posted by bob90245
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