Bonds are a better option than cash and less volatile than stocks, but investors should be mindful of headwinds and possibly rethink their fixed-income allocations, says Morningstar's Christine Benz.
Morningstar's Christine Benz demonstrates how our Tax-Equivalent Yield Calculator can help you determine whether you're better off investing in taxable or municipal bonds after adjusting for munis' tax-exempt status.
Inflows to fixed-income products continued in November on account of market-volatility worries, while equity outflows this year could surpass 2008 levels.
Relative to their categories, Fidelity's stock funds generally fared better than its fixed-income portfolios last year, but several funds in both camps have good long-term prospects.
Investors in mutual funds rushed to bond funds in 2012, shunning stock mutual funds.
Flows to muni bond mutual funds, though still negative, recovered much of their lost ground over the previous two weeks.
Municipal bond mutual funds recorded a second consecutive week of strong flows, as funds that report their flows weekly saw $1.44 billion in inflows for the week of Jan. 16.
Investors yanked an estimated $3.26 billion from municipal bond funds, giving them a severe black eye and their first weekly outflow this year.
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