Gundlach, DoubleLine & Floating Rates


Robert Carlson Image Robert Carlson Editor, Retirement Watch

Bonds have been tumbling since interest rates hit lows in July 2016, and the decline accelerated after the election. There’s been a partial recovery lately, but make no mistake, the outlook for bonds isn’t good, cautions Robert Carlson, editor of Retirement Watch.

Jeffrey Gundlach of the DoubleLine funds correctly forecast President Trump's victory;  he now expects the new administration will be bad for bonds, and that in a few years we’ll realize July 2016 was the bottom for the bond bull market that began in 1982.

This is a good opportunity to take Gundlach’s advice and reduce our bond exposure. We’ll put some of the money in DoubleLine Floating Rate (DBFRX).

If the $100,000 minimum investment isn’t for you, invest in the DoubleLine Floating Rate "N" shares (DLFRX). The only differences are a lower minimum investment and higher expenses.

DBFRX primarily buys floating-rate or adjustable-rate bonds. The interest rate paid by the borrower fluctuates with a widely published benchmark rate, such as LIBOR, which refers to the Intercontinental Exchange London Interbank Offered Rate.

The rate changes much like the interest rate on a credit card or adjustable-rate loan. Because interest rates on the loans float, the value of the loans doesn’t fluctuate as much with interest rate changes, and the fund is largely protected in periods of rising interest rates.

The fund still can lose value at times, if the interest rates on the loans held by the fund don’t reset quickly or the issuers aren’t financially stable.

Bank loans, also known as leveraged loans, are the primary investments of the fund.

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