Money For the Rest of Us Why Bond Investing Is Easier Than Ever
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May 7, 2025 Explore how bond market ETFs are revolutionizing investing, making it simpler and more affordable. Delve into the evolution of the vast $73 trillion bond market and how technology is reshaping accessibility for everyday investors. Discover the shift from mutual funds to ETFs and the challenges posed by liquidity. The discussion also highlights opportunities for active bond managers to enhance returns through innovative strategies in a changing financial landscape.
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Early Bond Investing Landscape
- In the 1990s, bond investing was mostly active and involved separately managed accounts with limited liquidity.
- Bonds often traded over the phone, and ETFs were not common, making investing challenging and less accessible.
Bond Active Management Success
- Active bond managers outperform more often than stock managers but success declines over longer periods.
- Active bond management is easier because big debt issuers in bonds can be adjusted for higher yields.
Bond Market Growth and Duration
- The U.S. bond market doubled since 2008 mainly due to increased Treasury debt and reduced mortgage-backed securities.
- The market's rising duration means higher sensitivity to interest rate changes, raising investment risk and reward.