Not a Spectacular Year for Bond Funds, but Consider the Alternative

Bond funds are for times like these.

The average stock mutual fund returned just 0.54% during the third quarter, and just 3.05% over the first nine months of the year, according to Lipper.

Bond funds, by contrast, are looking better and better: The average taxable bond fund returned 1.62% during the third quarter and 3.79% year to date. And those numbers are weighed down by the sorry performance of high-yield funds (which correlate closely with stocks), international funds (which correlate closely with foreign currencies) and global income funds (which also correlate with foreign currencies). Intermediate investment-grade bond funds -- the second most popular category after high-yield -- returned 2.71% during the third quarter and 5.88% over the first nine months. ...