Stellar returns posted by bond funds in CY2016 attracted many investors. However, most of these investors are now wondering if they have made a wrong choice as the past year has fetched lower single digit returns. The volatility in bond funds’ returns offers some important lessons to investors. Here they are:
Never base your investment decisions only on the past returns
The biggest behavioural flaw for most investors worldwide is to chase what is hot. CY2016 ended with income fund offering average returns of 11.9% that made many investors jump for investing in these schemes. However, CY2017 turned out to be a bad year, in which these funds offered 4.96% returns. Same is the case with dynamic bond funds — another popular type of bond funds. These schemes returned 3.55% in CY2017 as compared to 13.41% returns registered in CY2016.