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Safe isn't always safe



August 25, 2013 – Comments (5)

I got this from a LinkedIn feed.  It's a good rundown explaining that, in investing, 'safe' isn't always safe and 'risky' isn't always risky.

It looks like the valuations are all based on end of 2012, but still a good read.


5 Comments – Post Your Own

#1) On August 25, 2013 at 2:06 PM, constructive (99.96) wrote:

Articles about mutual fund flows always irritate me. The importance of mutual funds is in decline and we should not read too much into those numbers.

It's like the old joke about the guy who lost his keys and is looking for them under a street lamp. Someone comes up to him and asks him if he's sure that's where he lost them. He replies "No, I lost them in the park - but the light's better over here."

Mutual fund flow data is easy to get, so people use it without worrying whether it's useful.

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#2) On August 25, 2013 at 2:11 PM, constructive (99.96) wrote:

Of course most of that is not about mutual fund flows. Good read, thanks.

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#3) On August 26, 2013 at 5:26 PM, rfaramir (28.67) wrote:

"We can’t know when or why the safety bubble will end, or how quickly valuations will normalize. Broadly speaking, the turn will come when fear no longer drives the markets."


A bit of refreshing honesty in the report. We know so little of the future decisions of other people!

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#4) On August 26, 2013 at 6:32 PM, EvanBuck (99.93) wrote:

Good read...thanks for sharing.  Bond funds appear to me at these levels to be a false haven of "safety."

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#5) On August 28, 2013 at 2:41 PM, rd80 (94.68) wrote:

Thanks to all for the comments.

@EvanBuck - I'd agree that most bond funds probably have more risk than the fund owners realize.  My suspicion is a lot of investors don't really understand interest rate risks and, in the case of junk, some prices have been bid up to points where there isn't much default risk priced in.  

In general, I think bonds don't have a very good risk/reward balance at today's prices. There may be some exceptions in lower quality investment grade paper and higher quality junk.

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