Target-date funds have increased in popularity during recent years as a result of investors continually searching for easy, one-size-fits-all solutions to manage their money. But just how appropriate are these funds for the average investor? The answer may surprise you.
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The concept of momentum originated with regard to classical mechanics, in which it refers to the tendency of a moving object to keep moving along its direction of travel. In finance, and especially with regard to investing, we talk in terms of price momentum. As you can infer, this is the tendency for asset prices to continue moving in the same direction they are currently heading.
If you've done your homework and are aware of the risks of owning bonds, then you might have heard the argument that you can eliminate interest rate risk by owning individual bonds and holding them to maturity. Let's explore whether or not there is any truth to this line of reasoning.
When it comes to fixed income investing, there are two options available to investors. You can own individual bonds, or you can purchase shares of a bond fund. Both options have unique advantages and disadvantages that make them suitable under certain conditions.
During the last few decades, bonds have developed a reputation as being one of the safest asset classes to invest in. This is unfortunate because that false sense of security is going to take a large bite out of the retirement accounts and portfolios of many investors.