Stocks to Avoid #5: Vanguard Total Bond Market ETF (BND)
Truth be told, most bond funds are poised to struggle in the coming year. But since the Vanguard Total Bond Market ETF (BND) is the biggest bond ETF out there, it’s the best choice to use as our proxy.
The reason bonds and their funds are headed for a headwind is simple … the Federal Reserve has finally begun to “taper” by easing back on the size of their monthly purchases of Treasury bonds. The ripple effect will be diminished demand for all sorts of fixed-income instruments as institutional and retail investors follow that lead and extrapolate the idea to non-government bonds and paper. Less demand equals lower prices.
Thing is, now that the taper ball is rolling, it’s not apt to stop. Deeper cuts to the Fed’s bond-buying efforts are on the horizon, and that’s bad news for BND.
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As of this writing, James Brumley did not hold a position in any of the aforementioned securities.