Thursday, October 12, 2017 EST

Recently the topic came up in some discussions around Income Investing with Options and other Income type investments.  In that discussion some friends were discussing "safe" investments for retirement where you could park your cash and now worry about large drawn downs (well they said losing money) and you could watch your investments grow.

We revisited the idea of investing in (one or more Bond Funds). Yes we know the arguments "Invest in Bonds not Funds because Bonds Mature."  That is fine but investing in individual Bonds takes work and you must be diversified.

What people find amazing is that a Bond Fund can actually have Higher Returns over the long run over Stocks (investing in an Index like SPY or a Stock Fund).  How would you like to get Stock Market returns with little downside fluctuation, put your money to work, let it grow, and just go live your life?  For those of us that are more daring we trade options and stocks. This post is about retirement and just letting things ride.

What kind of "Ride" to you want for your investments? Bumpy or Smooth?

Notice the return of the Bond Fund (TGMNX) vs. the stock market (SPY).  What you will notice is that the Bond Fund had a greater return, and none of the downside drops that cause people to panic and sell at the wrong time.

Total Return Bond Fund (TGMNX):

  • Compounded Annual Growth Rate (CAGR): 6.34%
  • Best Year: 19.5%
  • Worst Year:  0.72%
  • Max Drawn Down: -3.33%  (the percent of balance lost / then recovered)

Stock Market (SPY ETF):

  • Compounded Annual Growth Rate (CAGR): 5.02%
  • Best Year: 32.31%
  • Worst Year: - 36.8%
  • Max Draw Down: -50.8%  (the percent of balance lost / then recovered)