The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Bonds & Fixed Income Investments


Subject:  Investing in Fixed-income Vehicles Date:  5/11/2013  4:23 PM
Author:  globalist2013 Number:  34926 of 35868

Is buying a CD ‘investing’, or is it merely ‘cash-management’? Is buying a junk bond ‘investing’, or is it reckless ‘speculation’? Those who self-identify themselves as “conservative investors” would never buy junk bonds, right? “Far too risky” they say. OTOH, those who traffic in junk scoff at the timidity of those who buy CDs. So, who’s right? Or is the true answer, “Neither”, because “… it all depends.” ROTFL.

Maria (and you know who 'Maria'” is, who does a credible job) interviewed Ray Dalio last Fall (whom you probably haven’t heard of, but should get to know), and his reluctant forecast, dragged out of him by repeating questioning, was for protracted, muddle-though recovery, not the doomsday scenarios of Maudlin, Casey, Schiff, Celente, etc. with whom I agree. For sure, Dalio hedges his forecast six ways from Sunday with a lot of conditionals. But the fact that he makes his argument from a lot of market history suggest that he might not be wrong, or at least that my pessimism might be overdone.

Should I take my fears of a broad market crash seriously enough that I re-orient my investing efforts, or should I give in to present complacency about the dangers some see ahead? Tough call, right? especially since trying to figure out how hedge wealth isn’t an easy job. But to that end this morning, I did a quick profile of my present portfolio to get a sense of what the problems might be. Roughly speaking, I currently holding 15% in cash and cash-equivalents, and the rest is individual bonds spread across the yield-curve and credit-spectrum. In other words, I’m pretty far from Ben’s recommended allocation of Stocks-Bonds: 50%-50%, +/-25%.

If the market does crash, the damage to my portfolio isn’t likely to be as severe as it was in the 2008-2009 correction, for three reasons. I’ve already suffered most of the losses I‘m going to suffer from positions that proved to have marginal credit-worthiness, such as Lehman’s debt. Many other financial issuers, such as BAC and GE, have been cleaning up their books by massively calling their bonds. I’ve been aggressively selling off anything I don’t want to hold in the next downturn. So, I’m pretty much prepared to hunker down if I have to and ‘ride it out'. That’s not the choice I’m going to make. When the market does crash, I’m going to sell short.

But that’s tomorrow’s worry, right? not today’s. Today, the sun is shining, and bond returns couldn’t be better. This got me to wondering how Lokicious was doing with the investing choice he made for himself compared to