Saturday, July 29, 2017 EST

This post looks at allocating money into one mutual fund that focuses on Bonds and Income. This is meant for someone that wants a simple solution (and no fees) to invest your money.

If you are looking at protecting your capital and do not want any risk, CD Ladders are a good idea. If you are willing to take limited yearly risk (and you do not want the risk of stocks or the stock market) you can look at investing in one or more bond mutual funds. 

Overview:  This model can look back many years, but let's look at a 10.5 year period where the initial investment was $20,000 in 2007.  As of July 2017 it would be valued at $31,429 or a return of 4.6% a year.

Investment:  

  • Mutual Fund: Lord Abbett Investment Trust Short Duration (LALDX)
  • Holdings: Corporate and Government Bonds (low duration / years) limited risk
  • How to Buy: Purchase through Fidelity Investments as a No-Load Mutual Fund (no fees to buy or sell)
  • Alternatives: There are many Fidelity Funds (and other funds) that can be purchased. Lord Abbett was chosen because it is Low Duration Bond Fund (meaning it invests in short term bonds which have less interest rate risk).

Returns: 

  • $20,000 Invested
  • $31,429 after 10.5 years
  • Compounded Avg Yearly Return: 4.6%
  • Best Year: +16.96%
  • Worst Year: -1.09%
  • Worst Downside Fluctuation: -7% 

Growth of the Portfolio over 10 years

Yearly Returns

You may look at the chart above and think "Well 18% return in 2009, what would this look like over the longer haul?"

The chart below is results of this fund investing $20,000 in 1994. Here are the results.

  • $20,000 Invested
  • $53,352 after 25 years
  • Compounded Avg Yearly Return: 4.2%
  • Best Year: +16.96%
  • Worst Year: -3.5%
  • Worst Downside Fluctuation: -7% 

If you want to review more details of portfolios with one or more bond funds and compared to the S&P 500 click here for that blog post.

 These model were built using Portfolio Visualizer

 

 
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