Bet on bonds now and you will kill inflation next year, says the expert

Czechs who poured money into mutual funds last year are experiencing sobriety. Neither stocks nor bonds thrive in stormy weeks. But the time of bonds is coming, they will also kill you, the economist Martin Mašát from Partners predicts.

Martin Mašát has experienced a 20% drop in the US S&P 500 index and lowered mutual funds four times in his 20-year career. “In 2000 it was a dotcom bubble, in 2008 the whole financial world almost went bankrupt, then you have a pandemic and then this year,” the economist Mašát calculates in the podcast Ve vata.

Precisely because of such shocks, the investor should divide the money between stocks and bonds, the textbooks say. When stocks fall, investors run into bonds, whose prices are rising. However, the proven theory did not work this time. Investors and bonds have not saved the last month.

Which mutual funds “armageddon” survived?

Mutual funds can be divided into equity, bond and mixed. The average performance of the shares offered in the Czech Republic in crowns was around minus 3.6 percent in a “bloody” April. Since the beginning of this year, investors have lost an average of 8.4 percent. So tens of billions. In total, they have invested over 700 billion crowns in them.

By comparison, stocks carry around eight percent a year on average. However, according to Martin Mašát, one escape strategy did exist. Avoid funds with a predominance of technology companies and replace them with energy ones.

“They went to the Czech Republic and to energy companies. Oil is at its peak, CEZ has made 20 percent up in the last few days, ”explains Mašát.

Compared to ETFs with passive management, which only copy an index such as the S&P 500, mutual funds with active management have higher fees. According to long-term statistics, still managed funds are 80% more likely to earn less than the market. So less than leaving the portfolio lying around. According to Mašát, this has not been the case in recent months.

“The stock fund index is minus eight percent in four months. But Europe is minus 15 and America is minus 20 percent, “he says in the podcast.

Martin Mašát

  • Economist of the Partners investment group.
  • He is responsible for individual investment management of major customers. He is in charge of the Partners 7 Stars equity fund, the Partners Bond Opportunity bond fund and prepares funds for the pension company Rentea.
  • He worked at ING Investment Management.

Bond time is just coming

The average price of quality bond funds fell by 1.1 percent in April. In the last twelve months, the loss has been five percent. It was caused by a fall in bond prices as their yields increased. Even more – also due to rising interest rates – the prices of risky bonds fell.

According to Mašát, however, now is a good time to buy bond funds. “We need to look to the future. Now the bonds carry four to five percent, but they are for 10 years, so you will even beat inflation, if we believe the CNB that inflation will be around four percent next year. ”

However, for bonds, it is necessary to select bonds of established companies or government bonds, he adds.

Listen to the whole episode in the player at the beginning of the article.

In cotton wool

Podcast of journalist Markéta Bidrmanová and her guests. Listen to advice from well-known investors and experts on investment, inflation, credit and mortgages. A financial “cap” for everyone whose money is not stolen.

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