If the purpose of buying bonds is to reduce the pain of losing money, why not also take a metric that automatically protect yourself from exuberance of the market.
- It fluctuates a lot less than the fund value
- It delays the immediate impact of a sustain change which leads to lower rash decision
- It remove unsubstantial change which leads to lower folly decision
- It reduces the fund in period of high value and increase it in period of low value.
- It doesn’t reflect the value of the fund directly. If you would sale the fund, no one is going to give you the Smoothed Value.
- It lags behind the real curve, if the interest rate is below real average rate of return or is in front of it if using too optimistic rate.
- It delays sustained change.
- Huge stress would be recognize over a long period. Thus the impact of the 2008 is felt even in when market were up a few years later.