|Expense Ratio (net)||0.43%|
|Last Cap Gain||0.00|
|Morningstar Risk Rating||Average|
|Beta (3Y Monthly)||0.69|
|5y Average Return||N/A|
|Average for Category||N/A|
|Inception Date||Jan 3, 1989|
At 67 and 64, respectively, Bill and Kathleen are starting to see many of their peers retire. In an effort to retire debt-free and to preserve their retirement assets for as long as possible, they plan to continue working for another five to seven years. Kathleen is the office manager for a pediatric medicine practice.
"If you're in your 30s or 40s and you think you have at least 20, 25 years until retirement, you should want to see these periodic market sell-offs, because you want to hold a mostly equity heavy portfolio at that life stage," says Morningstar director of personal finance Christine Benz. To Benz's point, the S&P 500 is up about 11% per year for the trailing five-year period. As such, investors may find that their portfolios are light on bonds and international stocks.
Corporate bonds were a definite bright spot for investors in 2016 and 2017 as they came off lows hit in February 2016. Investment-grade corporates in the Bloomberg Barclays U.S. Aggregate Bond Index outpaced the broad index sharply in 2016 and 2017 before suffering meaningful losses in 2018, thanks in part to the prevalence of long-maturity debt in the sector and an increase in the yield required by investors to hold investment-grade corporate debt. On the surface, economic conditions would look to bode well for corporate bonds.
Amid such a high level of uncertainty, it will be prudent to pick safe mutual funds. Such funds are inherently less volatile than the markets they trade in.
A version of this article was published in the September 2018 issue of Morningstar FundInvestor. In March, my colleague Emory Zink wrote about elevated risks of a sell-off in the corporate bond market ("Tiptoeing Towards the Exits in Corporates"). Citing remarkably narrow option-adjusted spreads among investment-grade corporate bonds (85 basis points in January--a decade low), she discussed some intermediate-term bond funds that had begun to pare back their corporate exposures.
Amid high level of uncertainty, it will be prudent to pick safe mutual funds. Such funds are inherently less volatile than the markets they trade in.
Investors continue to flock to index funds in droves, but they've kept the faith in some actively managed bond funds and a few strong-performing active international-stock strategies.