I can find the right bond funds to build balanced portfolios.
Cumulative returns for select taxable and tax-exempt core bond funds during recent market corrections — Class F-2 (%)
Using Bond Funds in Portfolios
Sources: Capital Group, Morningstar. As of 12/31/18, the average annual total returns for Standard & Poor’s 500 Composite Index were: one year: 4.38%; five years: 8.49%; 10 years: 13.2%.
The market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. Past results are not predictive of future results. Dates shown for market corrections are based on price declines of 10% or more (without dividends reinvested) in the unmanaged S&P 500 with 50% recovery between declines for the earlier five periods shown. The most recent period is still in correction phase as of 12/31/18. The returns are based on total returns. There have been periods when the funds have lagged the index, such as in rising equity markets. American Funds Strategic Bond Fund returns shown for the two most recent periods, which followed its launch on 3/18/16.
Average yield to maturity
*Taxable-equivalent yield to maturity: Based on a federal marginal tax rate of 37%, the top 2018 rate. In addition, we have applied the 3.8% Medicare tax. This comes to a combined 40.8% marginal tax rate on the investment income for taxpayers in the highest tax bracket. Taxable-equivalent SEC yields as of 12/31/18 for The Tax-Exempt Bond Fund of America and American High-Income Municipal Bond Fund were 4.05% and 5.44%, respectively. View fund SEC yields.
Source: Capital Group
Treasury Inflation-Protected Securities (TIPS) vs. Consumer Price Index (CPI)
Using Bond Funds in Portfolios
|Fund name||Diversification from equities||Income||Capital preservation||Inflation protection|
|Short and intermediate funds|
|Short Term Bond Fund of America®|
|Intermediate Bond Fund of America®|
|The Bond Fund of America®|
|American Funds Strategic Bond FundSM|
|Capital World Bond Fund®|
|Fixed income sector funds|
|American Funds Corporate Bond Fund®|
|American Funds Inflation Linked Bond Fund®|
|American Funds Mortgage Fund®|
|U.S. Government Securities Fund®|
|Fixed income extended sector funds|
|American Funds Emerging Markets Bond Fund®|
|American High-Income Trust®|
|Municipal core funds|
|The Tax-Exempt Bond Fund of America®|
|The Tax-Exempt Fund of California®|
|American Funds Tax-Exempt Fund of New York®|
|Limited Term Tax-Exempt Bond Fund of America®|
|American Funds Short-Term Tax-Exempt Bond Fund®|
|Municipal extended sector funds|
|American High-Income Municipal Bond Fund®|
Find out how American Funds builds portfolios to meet the real world needs of investors.
Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and/or returns will vary, so investors may lose money. Investing for short periods makes losses more likely. View fund expense ratios and returns.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor's, Moody's and/or Fitch, as an indication of an issuer's creditworthiness. If agency ratings differ, the security will be considered to have received the highest of those ratings, consistent with the fund's investment policies. (For American High-Income Municipal Bond Fund and American High-Income Trust, such securities are placed in the lowest category.) Securities in the Unrated category have not been rated by a rating agency; however, the investment adviser performs its own credit analysis and assigns comparable ratings that are used for compliance with fund investment policies. Investments in mortgage-related securities involve additional risks, such as prepayment risk, as more fully described in the prospectus. While not directly correlated to changes in interest rates, the values of inflation-linked bonds generally fluctuate in response to changes in real interest rates and may experience greater losses than other debt securities with similar durations.
State-specific tax-exempt funds are more susceptible to factors adversely affecting issuers of their states' tax-exempt securities than more widely diversified municipal bond funds. Income from municipal bonds may be subject to state or local income taxes and/or the federal alternative minimum tax (except for The Tax-Exempt Bond Fund of America). Certain other income, as well as capital gain distributions, may be taxable.
The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional cash securities, such as stocks and bonds. American Funds Strategic Bond Fund may engage in frequent and active trading of its portfolio securities, which may involve correspondingly greater transaction costs, adversely affecting the fund's results.
Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries.
There may have been periods when the fund(s) lagged the index(es). Certain market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses.
When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower.
Fund results for periods before a share class was sold are hypothetical. These hypothetical returns were calculated by adjusting Class A share results without a sales charge for the difference between the Class A share expense ratio and the estimated expense ratio for the share class as of the date of first sale. View dates of first sale and specific expense adjustment information.
The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.
Content contained herein is not intended to serve as impartial investment or fiduciary advice. The content has been developed by Capital Group, which receives fees for managing, distributing and/or servicing its investments.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.
The Standard & Poor's 500 Composite Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2019 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.
Bloomberg® is a trademark of Bloomberg Finance L.P. (collectively with its affiliates, "Bloomberg"). Barclays® is a trademark of Barclays Bank Plc (collectively with its affiliates, "Barclays"), used under license. Neither Bloomberg nor Barclays approves or endorses this material, guarantees the accuracy or completeness of any information herein and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
© 2019 Morningstar, Inc. All Rights Reserved. Except for Lipper rating information, the information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar, its content providers nor the American Funds are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Information is calculated by Morningstar. Due to differing calculation methods, the figures shown here may differ from those calculated by American Funds.
Past results are not predictive of results in future periods.