Beware the fixed income investing traps

ON BONDS

Investors have many reasons to be cheerful in 2013. For example, the outlook for bond investments - contrary to the mutterings of the doom-mongers (who are invariably over exposed in equities) - is very positive.

But to wring the maximum value from bonds, fund managers need to know where to look. There are so many golden rules of investing that it is easy to become confused.  Debates continue unresolved on active versus passive management, top down versus bottom up strategies and whether performance fees offer an appropriate incentive for fund managers, for example.    One of the most common mistakes made by investors is to select investments mostly on the basis of forecasts in order to ‘beat the market’. The reasoning goes along the lines of: ‘Inflation in country X is 4% and GDP growth is 2%...