BombayAg said:
I mean those who investment mostly in bonds rather than stocks. Or Bond Funds like PTTRX. I have never done bonds and when I go to explore I see depressing returns in the charts. How do people make money in bonds? Stocks seem much better, even just plain indexing.
Your problem might be that you are looking at historical returns. That can cause you to invest in recent trends, which can sometimes be already crowded.
We (family) are currently in about 50/50 in my liquid portfolio. Most of it is in municipal bonds and municipal bond funds, although we do have some high yield corporate bonds, treasuries etc.
At a Shiller CAPE > 30, the expected returns for stock seem to be less than 4%. Well, you can get an after tax return at about that much in the bond market. There is interest rate risk, but the talking heads on CNBC have overblown it. The 30 year treasury is still priced as if 10 year treasury interest rates wont stay about 3% for very long.
Plus, high grade bonds have a negative price correlation with stocks during a heavy market draw down. I have made and lost a good bit of money catching falling knives, so it is nice to have dry powder available to catch some more IF a downturn happens.