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Time to Dump Bonds? No

Submitted by Lon Jefferies on Tuesday, November 11, 2014 - 12:00pm

If you invest in bonds, you probably worried in recent years about rising interest rates. You shouldn’t.

Climbing rates mean your existing bonds effectively yield less and make you yearn for newer bonds with higher yields. Bond prices fall as yields rise. A valid concern – today’s historically low interest rates are overdue to jump – but is now when to scrap your old paper?

First, consider one of the most basic principles of investing: Markets are unpredictable. Are we certain interest rates will rise? If so, soon?

The Fed’s Foggy Phrasing

Submitted by Brenda P. Wenning on Friday, November 7, 2014 - 9:00am

The mystery of how long the Federal Reserve will keep short-term interest rates near zero continues. But now, oddly, the central bank is looking at different ways to say they will stay low for a “considerable time.” Why do we need a synonym for this maddeningly vague phrase, which Fed chief Janet Yellen reiterated in her recent press conference?

Rate Forecasts: Always Wrong

Submitted by Michael Garry on Friday, October 31, 2014 - 9:00am

Don’t believe interest rate forecasts, let alone build your investment strategy around them. Expectations about interest rates change because of the news every day. But they regularly are dead wrong.

In a recent article, Bloomberg News noted that the rally in the U.S. Treasury market in 2014 was stronger than every economist it surveyed had predicted. Yes, stronger than every one of 66 economists polled.

Curbing Interest Rate Shock

Submitted by Barry Glassman on Tuesday, October 21, 2014 - 9:00am

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?

Submitted by Nicholas Atkeson and Andrew Houghton on Friday, October 17, 2014 - 9:00am

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

Submitted by Joseph A. Clark on Friday, October 10, 2014 - 9:00am

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.

What Is Your Risk Tolerance?

Submitted by David Geracioti on Friday, October 3, 2014 - 3:00pm

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.

Fed’s Murky Rate Language

Submitted by Brenda P. Wenning on Tuesday, October 7, 2014 - 9:00am

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.

Why Use Money Funds at All?

Submitted by Gary Brooks on Thursday, October 2, 2014 - 9:00am

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.