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I'm looking to expand my investing a little bit, by starting into a bond MF. To date, my investing has pretty much been 99.8% stocks. However, I'm starting to learn the value of having even a limited amount of bonds as a buffer to the volatility of stocks (current events, anyone?). I'm considering moving toward a 90% stocks/10% bonds balance. I'm sorry for being so verbose, but I wanted to clarify a few questions I have before I jump headlong into this... Any help would be appreciated, but I also recognize I'm full of questions, so feel free to say so if I'm asking too much.
First, can someone please explain the terms associated with bond investing? I keep hearing that yield and price move opposite of eachother... what should that mean to me, the novice investor? Also, what does each term mean individually (not in reference to the opposite term)? How does 'yield' compare to an investment's return? The whole price/yield thing just completely confuses me, really...
Is it good to buy into bonds when yields are low, or when they are high? What is the current state of the bond market--is now a good time to get into bonds, or have other times been better for buying into bond investments? What constitutes "good" vs. "poor" investing conditions for bonds?
Also, what exactly are "tax-exempt" mutual funds? I see a number of those (both as bond MF's and money market MF's), and while it seems obvious that you simply don't pay taxes (federal? or both fed and state?) on your gains, I wanted to clarify exactly what "tax-exempt" means in terms of how it impacts your return, and basically how they 'work'... Would any of those gains just not be reported on my taxes? Are there any pros/cons (beyond the tax implecations) to regular vs. tax-exempt bonds?
What should I know about the term-length of bond funds? I'm looking at USAA's bond funds, since I've got all of my other investments there, and they have short-term, intermediate-term, and long-term bond funds. How are they different, and what considerations do each have relative to eachother?
I'm looking mostly between USSBX, USSTX, USIBX, USATX, and USTEX. So what should I be looking at to compare bond MF's? Obviously their expense ratios and historical returns, but what else should I take note of in deciding what to invest in?
Again, I'm sorry for the plethora of questions, but any help you can offer me in understanding all of this would be greatly appreciated.
First, can someone please explain the terms associated with bond investing? I keep hearing that yield and price move opposite of eachother... what should that mean to me, the novice investor? Also, what does each term mean individually (not in reference to the opposite term)? How does 'yield' compare to an investment's return? The whole price/yield thing just completely confuses me, really...
Is it good to buy into bonds when yields are low, or when they are high? What is the current state of the bond market--is now a good time to get into bonds, or have other times been better for buying into bond investments? What constitutes "good" vs. "poor" investing conditions for bonds?
Also, what exactly are "tax-exempt" mutual funds? I see a number of those (both as bond MF's and money market MF's), and while it seems obvious that you simply don't pay taxes (federal? or both fed and state?) on your gains, I wanted to clarify exactly what "tax-exempt" means in terms of how it impacts your return, and basically how they 'work'... Would any of those gains just not be reported on my taxes? Are there any pros/cons (beyond the tax implecations) to regular vs. tax-exempt bonds?
What should I know about the term-length of bond funds? I'm looking at USAA's bond funds, since I've got all of my other investments there, and they have short-term, intermediate-term, and long-term bond funds. How are they different, and what considerations do each have relative to eachother?
I'm looking mostly between USSBX, USSTX, USIBX, USATX, and USTEX. So what should I be looking at to compare bond MF's? Obviously their expense ratios and historical returns, but what else should I take note of in deciding what to invest in?
Again, I'm sorry for the plethora of questions, but any help you can offer me in understanding all of this would be greatly appreciated.