Why focus must shift to total return for troubled bond market

FIXED INCOME

Jim Kochan, a fixed income strategist at Wells Fargo Asset Management, shares his views on the best way to ensure successful investing in the fixed income sector in the current environment.

In virtually every market around the globe, bond prices have dropped sharply, producing steeply negative total returns for the May to June period. For investors who focus exclusively on the prices of the bonds they own or the net asset value (NAV) of the mutual funds they own, the news was even worse. This focus on price is understandable because it parallels how most investors evaluate the performance of equities. In recent weeks, investors have sold a huge volume of exchange-traded funds and have withdrawn a record volume of funds from mutual funds in response to the falling prices....