An Introduction

Hi. Welcome to BourGroup and my blog. Phil

Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.

I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.

"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.

Thursday, February 13, 2014

Bonds and a Negative Annual Return


There is much talk these days about the future of bond funds because interest rates will likely rise resulting in potential losses in bond funds.

Craig L. Israelsen in a Financial-Planning.com magazine article entitled The Rebalance Premium (June 2011) reminds us that "...bond funds seldom have had negative annual returns, while stock funds lost money in a calendar year nearly 30% of the time..."

Do not lose sight of the importance of cash and bonds to stabilize a portfolio.

"...over the 85-year period from 1926 to 2010...bonds had a negative annual return on eight occasions, about 9% of the time..."

More importantly, using Ibbotson U.S. Intermediate-Term Government Bond Index, "...the losses were relatively small, never exceeding 3%. Over the same period, stocks were in the red 24 times, or 28% of the time. Six of the annual losses exceeded 20%...."

He further drives home the point, looking at 3-year returns over this 85-year period, "...the worst three-year slide for the S&P 500 was a 61% free fall, but for bonds the worst cumulative return over any three-year period was 1.6%..." (yes, less than 2%).

As the article reminds us, this illustrates "...the pragmatic difference between stocks and bonds..."