Where Did It Go?

Bond Funds Bleed $61.7 Billion

Battered by rising interest rates and falling prices, investors have yanked out a record $61.7 billion from bond funds in June, according to TrimTabs.com.

But the second half of the Great Rotation-the move from bond funds into stock funds-hasn't started yet, according to the most recent statistics. The bond fund outflows shatter the previous record of $41.8 billion in October 2008. Through June 24, investors have pulled the net $52.8 billion from traditional bond funds and another $8.9 billion from exchange traded bond funds.

Bond prices fall when interest rates rise, and rates have been rising since May 2, when the yield on the benchmark 10-year Treasury note hit 1.63%. It closed at 2.54% Wednesday.

The rate rise was enough to shock bond investors, who have enjoyed rising prices and falling yields for decades. A record $1.21 trillion poured into bond funds in the four years from 2009 two 2012 according to TrimTabs.com.

The question is where did all the money go? “Given recent stock market performance, we don’t expect there will be big flows to equities anytime soon,” says David Santaschi CEO of TrimTabs.

Clearly investors are taking their money and running. Does this mean there’s an opportunity for

wise advisors? The opportunity is better than it has been the past 5-7 years for index annuities.

Top advisors use three key questions to properly position the conversation:

1.   Would an investment the offers 100% downside protection with 100% upside growth potential linked to the S&P 500 Index including dividends be of interest?

2.   If I could show you a way to GUARANTEE a stream of income that you and your spouse can’t outlive regardless of low interest rates, schizophrenic stock markets, falling bond prices, and living to a ripe old age, would that he something we can discuss.

3.   Would an investment that provides 3X the income when you or your spouse is confined

be better than the current investment you own?

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