The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing

URL:  http://boards.fool.com/there-is-nothing-particularly-safe-about-bonds-30793033.aspx

Subject:  Re: Bonds vs equities - OT? Date:  7/24/2013  3:31 PM
Author:  joelxwil Number:  72676 of 76237

There is nothing particularly safe about bonds. Bonds bought now, in this low interest rate, will lose value when interest rates go up, which is bound to happen before too long.

The point is that is a matter of when you buy and what the current interest rates are at that time, as well as the maturity date of the bonds.

Of course if you buy bonds with close-in maturity dates, e. g. 90 day Treasury Bonds, you can hold to maturity without too much trouble. You just might miss a buying opportunity in stocks by a little bit.

Years ago, I built a bond portfolio which was well diversified. It had about a 10% yield, and therefore brought in good income. Interest rates were generally high at the time, and the stock market was terrible. When interest rates went down, I was faced with the decision of whether to sell at a profit and put the money into stocks, which were doing very well, or hold bonds longer. Holding to maturity was not a good idea, since the bonds were selling over par. Anyway, I eased out of the bonds and went into stocks.

The point is that there is a time to buy and a time not to buy bonds. Having some kind of allocation between stocks and bonds is not a good idea.
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us