Curbing Interest Rate Shock

What are the best bond investing strategies for retirees amid rising interest rates? There are two. I like to call them the “stuff in between” strategies, because they fall between bonds (whose values are vulnerable to rates increases) and stocks (usually not affected).

As the economy gradually recovers, the Federal Reserve keeps hinting at increasing rates. While higher rates are not a bad thing for retirees who invest primarily in bonds, traveling into that territory can be treacherous, and calls for some careful planning.

What Great Rotation?

The epic bond rally that began in the early 1980s seems about to end, as the Federal Reserve eyes raising interest rates. So investors keep hearing about a so-called Great Rotation out of bonds into stocks. Well, it’s not happening, due to lingering leeriness about equities after the horrendous market slide that the financial crisis created – memories that this month’s slide have reinforced.

Lagging Small-Caps: Bad Sign

The stock market rally of 2014 is not uniform. Turns out that not all stocks are created equal. Small–cap stocks are negative this year, at odds with their historical tendency to do well in an economic expansion. That sounds a cautionary note for investors.

Fed’s Murky Rate Language

The word for today is “considerable,” as in the Federal Reserve’s recurring statement that interest rates will remain low for “a considerable time.” But how long is “a considerable time”? The deliberate murkiness of this phrase, like much else the central bank says, is maddening.

What Is Your Risk Tolerance?

How do assess your stomach for risk in investments? By looking at when you need the money and your spending habits, a panel of advisors said. But the current market’s situation also is a factor in investors’ capacity for risk.

“The time to worry is when no one is worried about risk,” said Don Hutchinson, senior vice president of Goelzer Investment Management.

Why Use Money Funds at All?

Money market funds are a zombie investment. So why does anyone invest in these funds – one of the most important tools for savers over the past several decades, and now essentially among the walking dead? Because, despite their tiny interest payments and many other disadvantages, money funds seem relatively safe.

The Fed’s Bafflegab

Obfuscation is an art form in which the Federal Reserve excels.  Our nation’s central bank follows a few simple rules:

The ECB’s Useless Stimulus

The European Central Bank is trying to stimulate the continent’s sagging economy. Judging by the Federal Reserve’s fruitless efforts to perform such a miracle on the U.S. economy, the ECB is wasting its time.

The Long Bond Rally Lives On

For the past five years, prognosticators, legendary fund managers and other savants have predicted the end of the incredible 30-year bull market in U.S. Treasury bonds. Odds are, though, that it won’t stop soon, thanks to Treasuries’ status as a refuge in a turbulent world and the Federal Reserve’s ongoing interest in avoiding an economy-jolting rate shock.

Whether that’s a good thing is another question. What’s for sure is that reversing the momentum of a longstanding trend of lower bond yields is not easy.

Bond Fund Prices Stale?

Beware of buying bond funds whose prices are stale, giving speculators an opening. With some seldom-traded categories, like junk bonds, old prices can make the funds holding them cheaper – or more expensive – than they should be.

Bonds, unlike stocks, aren’t traded on central exchanges. So, for instance, when some junk issues are lightly traded, reporting on their current prices takes a while to catch up. The price you pay for a fund is based on those of the individual bonds in its portfolio.


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