Investors Lost Big Last Decade
At least half of U.S. stock fund investors lost 25 percent or more over the last decade
In case you haven't noticed, retail investors are terrified of the stock market -- and they're plowing into bonds. Maybe that's
because, according to a new survey from
This research points to a recurring problem: Individual investors are terrible at trying to time the markets.
"Thanks to poor market timing, mom and pop incurred particularly awful returns in the past decade," says Vincent Deluard, executive vice president at TrimTabs, in a press release. "We also find that misguided entries and exits on the part of retail investors are the rule, not the exception."
TrimTabs used flow-weighted purchasing prices to show that stock fund investors bought into the
Skittish investors need to be aware, though, that just because bonds performed well over the last decade doesn't mean bonds will perform equally as well over the next decade.
Mattive cites recent research: "According to the
If investors are comfortable holding individual bonds to maturity, they will still be able to get their principal back, Mattive says. But he warns fund investors that most fund managers don't hold their bonds to maturity, and investors can experience capital losses if rates are raised over time.
Mattive finishes with some poignant advice: "Whether you're buying individual bonds or broad-based funds, do your homework and realize that very few options are completely risk-free -- especially at a time like this, when investors are eagerly snapping up nearly any kind of debt
Armstrong advises investors to look to other undervalued areas of the market that could see big gains over the next five to seven years -- real estate investment trusts (REITs) in particular.
Lastly, fixed-income investors who are starved for yield now have some options.
The 10-year treasury bond may yielding only about 2.5 percent, but other sectors of the bond mark like corporate and high-yield bonds are offering much more attractive yields. At the end of 2009, the high-yield default rate stood at a whopping 13 percent, according to
Some funds like the one Moini runs are offering a yield of more than 7 percent.
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