The 5 Best Bond Funds Available Today

best bond fundsNot all bond funds will provide you protection from the turbulence of the stock market. If you are looking for the best bond funds which will act as a shock absorber to the stock market, we suggest that you choose of one of the funds below.  All the funds are  “Core Bond Funds” and rated four of five stars by LB Bond And Mutual Fund Ratings.  You can learn more about core bond funds here.

All the fund’s on the best bond funds list hold a portfolio of high quality, low risk bonds.

Best Bond Funds for 2013 and Beyond

Should you own a bond fund?

Yes. You have probably heard many arguments that have been recently marshalled against owning bond funds. Here are the major ones:

1) Yields are incredible low. They have only one place to go: higher. This would send the value of bonds and bond funds down.  This is true for the best bond funds list above as well.

2) The expected returns of stocks are much higher than bonds. With everyone living longer, you need to build a bigger nest egg. For many people, a bond heavy portfolio will not allow them to retire without dramatically reducing their expenses.

Both of these arguments have serious flaws.

1) Its hard to predict the future. For many years, well-known market figures have been predicting that bond yields will rise. During that time, yields have gone lower and lower. Those that avoided bonds would have missed out on a huge rally. Because we cannot predict the future,  we diversify.  There is a saying, “Economists have predicted 10 of the last 3 recessions.”

If the stock market crashes, you want to have a big chunk of your portfolio in bonds. While bonds might lose value during a market crash, they will lose much less value than stocks, reducing overall losses. Bonds serve as a shock absorber for the volatility of the stock market.

2) Owning stocks does mean more returns, however it also means more risk. The odds are in your favor that you will be better off, however there is more than a small chance that you will be much worse off. You can think of having a good portion of your portfolio in bonds as an insurance policy. With insurance, you’re paying money (giving up potential returns) to receive help if something bad happens.

To learn how much of your portfolio should be in bonds go here.


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