Submitted by Jonathan DeYoe on Fri, 11/22/2013 - 9:00am
If the three-decade-old bond party is over, should you forget about them? Not at all. Here is why bonds deserve to keep a prominent place in your portfolio, regardless of what happens to bond prices.
There is a lot of attention paid to the bond bubble. Maybe there is one, maybe there isn’t. Maybe it pops spectacularly or maybe it doesn’t. We aren’t predicting an outcome here. We won’t know for sure until it pops or slowly deflates over time, as today’s very low rates return to some level of normal.
Submitted by Jared Kizer on Mon, 11/18/2013 - 9:00am
Higher rates are almost certainly good news for the vast majority of fixed-income investors. That flies in the face of what you often hear: Increased rates spell bond price drops.
The usual advice to investors is that they should ignore rate fluctuations and hold onto a bond until maturity, when they get back their full principal. But there’s a little-known corollary: If your investment horizon – how long you want to stay with a security – exceeds the maturity of the bond you hold, you are generally better off if rates go up.
Submitted by Jim Ludwick on Tue, 10/22/2013 - 9:00am
A lot of investors don’t realize that you cannot simply buy, hold and forget about it. Your investment mix should not be static. How much you have in stock, in bonds and in other instruments hinges on many factors. Like your age.
The U.S. stock market high in mid-September prompted a discussion with my business partner, Anna Sergunina. “So what does that mean to us?“ I asked.
“Nothing to me,” replied my younger partner. She was right: Anna has a lot longer to build wealth – and recover from market down drafts – than I do.
Submitted by John Bussel on Wed, 10/16/2013 - 9:00am
Interest rates are up. If they continue to rise, how can you protect your bond portfolio? A good answer is to concentrate your holdings in intermediate maturities, with terms between three and 10 years.
They will suffer less than longer-term bonds and give you flexibility. In fact, the intermediate strategy works in all seasons, even when rates are dropping. Bond prices rise or fall inversely with rates.
Submitted by Manisha Thakor on Mon, 09/30/2013 - 9:00am
One investing style seems all on-the-edge flash. The other is slow and steady. Both can win the stock market race, but history shows one wins a lot more often than the other. Here are ways to decide which is right for you.
Picture two cars driving down a three-lane highway. A red sports car darts between all three lanes trying to find the fastest possible way ahead. A gray sedan in the right lane steadily goes the speed limit. Suddenly a train whistle sounds and in the distance the barrier arm of the railroad crossing comes down.
Submitted by Matthew Tuttle on Thu, 09/26/2013 - 9:00am
Whenever the market goes through periodic convulsions, as it did in August and likely will again, you hear the concept of diversification praised. The most celebrated system for diversifying is called Modern Portfolio Theory. Don’t fall for it.
One of the criticisms that I often hear about MPT is that it doesn't work as well as it did in the 1990s, when the market was rising. That is not true. MPT works just as well as it did at any time in history, which is not at all.
Submitted by Raul Elizalde on Fri, 09/20/2013 - 9:00am
A conservative portfolio is now synonymous with a bond-heavy one. But if interest rates continue to rise, bonds will no longer be the safe haven investors have taken for granted.
Because bonds do well when interest rates go down, 30 years of rate declines convinced many that bonds are “safe.” But a rising interest rate cycle seems to be taking hold, and bond investors are now exposed to unfamiliar risks by holding on to such allegedly conservative portfolios. If interest rates climb more, those portfolios will not provide the safety that investors seek.
Submitted by Brenda P. Wenning on Tue, 09/17/2013 - 9:00am
Turns out that the Federal Reserve’s words carry a greater impact than its actions. Up ahead, the central bank intends to rely even more on jawboning to influence interest rates, with a big effect on capital markets.
President Barack Obama’s campaign slogan for last year’s election was “Forward.” The Fed’s slogan in the coming months may be “forward guidance.”
Submitted by Michael Garry on Fri, 09/13/2013 - 9:00am
A standard investment tenet is that stocks are unpredictable and bonds more stable. Nowadays, though, bonds confound expert expectations.
The Federal Reserve has tried, with great success since the economic crisis five years ago, to keep interest rates low. The Fed assumes lower interest rates stimulate lending and consumer spending. Lately, however, that certainty has frayed: Economic growth remains sluggish.