Bond Inflows Show Off Annuity Advantages And Address Stupid Investors

Bonds are putting to the test a long-held, but inadequately investigated, safety hypothesis as the economic landscape drastically shifts and a “new normal” emerges in the fixed-interest market. Anybody with even a passing familiarity with personal finance, when asked about safe assets, will probably bring up bonds. In turbulent times, the investment business presents them as a reliable asset. But do they really? Most probable for a few significant and knowledgeable institutional investors. For the individual investor, however, the responses are far less clear.

I recently looked over bond fund inflow data to try to figure out what the following meant:

Where do Americans go to reduce the risk in their bond portfolios?
Who has prevailed in this endeavour?
What proof is there that those winners are the best option (i.e., is there a discernible reason for the purchasing behaviour)?
Though the inflow data isn’t exactly as well-organized as I had hoped, I was still able to locate information on the largest bond fund inflows for the September 2021–August 2022 period. The particular article included ten bond funds that raised $83.4 billion in total throughout this period.

Reliability Outperforms The Competition
Fascinatingly, Fidelity emerged victorious from this bond fund buying spree, securing nine out of ten positions with its diverse selection of bond funds.

Now, I have a sneaking hunch that this fact reveals more about Fidelities’ performance as the top 401(k) in the country—measured by account numbers—than it does about its superiority as a fund provider. Put differently, a large number of 401(k) accounts at Fidelity were accessed by individuals who transferred monies to bond funds. Bond funds from Fidelity were the best option—possibly the only one in many cases—because the company sponsors a large number of those 401(k) plans.

In order to go a little deeper, I wanted to examine the investment performance of these top-performing bond funds over the previous 1, 5, and 10 years. This was a test to see what investors in bond funds could expect, first and foremost.