Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Jason Stipp and Christine Benz | 12-18-2014 05:00 PM

Benz: 4 Biggest Investing Surprises of 2014

Morningstar's director of personal finance says bond gains, oil's fall, and Bill Gross' big move topped the unexpected list this year.

Jason Stipp: I'm Jason Stipp for Morningstar. As 2014 draws to a close, we are taking a look back to see what were some of the things that surprised us most in the market. I am checking in with Christine Benz, our director of personal finance, to get her take.

Christine, thanks for joining me.

Christine Benz: Jason, great to be here.

Stipp: We had a few surprises this year to choose from. It was a volatile year in some ways, and certainly some things caught us off guard. The first surprise: You say that probably the biggest surprise was bond performance this year.

Benz: That's right. Investors have been on pins and needles about their bond holdings really for several years running. And if you had told me at the outset of 2014 that the long-term government bond would have returned upwards of 20% so far in 2014, I would have been very, very surprised. Very few people were calling for yields to drop further still, but in fact they did. And that had positive effects for all manner of bond funds, especially higher-quality and longer-term bond portfolios performed very, very well during this period.

One thing, too, that I think has probably surprised a lot of observers--me included--is that the Barclays Aggregate Index, which I think a lot of people thought was just going to be a lay-up market benchmark to beat over the next few years, has actually outperformed most active intermediate-term bond funds. Many people thought that its heavy emphasis on government bonds and its meager yield would work against it, but it's really actually been a very nice index to hold if you had fixed-income exposure so far in 2014.

Stipp: And that's important to point out because a lot of active managers have been shorter in their duration because they've also been worried about interest rates rising. So, they also were probably surprised by what we saw.

Benz: They have been shorter, for sure. We've seen that. We've also seen a lot of bond-fund managers emphasizing corporate and other bond types at the expense of government bonds when, in fact, government bonds have had a really nice rally here. Most active funds did not own that much in government bonds.

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article