> Individual bonds and bond funds are two quite different types of investment and should not be considered equivalent.[0]
Bond funds move based off of the sum of bonds that are inside of them.
Much like we programmers study assembly code to understand the machine, even though we write code in C++ or Javascript, any bond fund owner should study bonds to understand the underlying mechanics and risks of the overall fund.
> The difference between LC and a Junk corporate bonds is that with LC you are investing in hundreds of loans at $25 each. You can't get the same kind of diversification corporate bonds.
At some point I have to better understand the weird relationship between bonds and bond funds. If rates are low then bonds are a low performing investment, but apparently bond funds go up.
Commercial paper is not junk bonds, and is pretty standard for a money market fund to hold. It’s a pretty specific thing and doesn’t really deserve scare quotes.
They're not. There are actually multiple different definitions of "money" in use, because it's complicated to define exactly what distinguishes money from a financial instrument, but corporate bonds aren't included in any definition I'm aware of.
> Pension funds, mutual funds, and other impersonal investment vehicles have rules and formulae they're supposed to be following. To the extent that those rules call for the holding of safe bonds, some bond-buying can simply happen on autopilot.
> Bond mutual and exchange-traded funds now own 17% of all corporate bonds, up from 9% in 2008, according to the ICI. In periods of market stress, more-concentrated mutual-fund ownership tends to mean larger price drops, the IMF said last year.
This is way better than 17% of all corp bonds being controlled by hedge funds. Being levered money, HF selling would be way more disruptive to the marketplace than mutual fund selling.
With the important difference that money market accounts should never lose principle (aka "breaking the buck"). It has happened, but its fairly uncommon.
Bond funds, however, frequently can and do lose value - if interest goes up, price goes down (the reverse should also be true, though).
This is extremely misleading and no one should be using bond funds as a checking/savings account replacement. You have mark to market and liquidity risk here which in normal circumstances you do not have with a savings/checking account.
Additionally, Robinhood is reportedly investing proceeds in US Treasuries. US Treasuries have a completely different risk profile than corporate investment grade bonds.
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