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Author: cyclelex One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76398  
Subject: Bonds? Date: 1/29/2007 10:27 AM
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Is there a board on bonds? How do most feel about bonds, and where is a good place to learn about bonds. I feel I am lacking in bonds in my port, and my knowledge base.

Thanks Cyclelex
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Author: DorothyM Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55459 of 76398
Subject: Re: Bonds? Date: 1/29/2007 11:23 AM
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http://boards.fool.com/Messages.asp?bid=100135

Bonds and Fixed Income Investments

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55464 of 76398
Subject: Re: Bonds? Date: 1/29/2007 7:26 PM
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Book suggestion: The Only Guide to a Winning Bond Strategy You'll Ever Need: The Way Smart Money Preserves Wealth Today by Larry E. Swedroe and Joseph H. Hempen

http://www.amazon.com/Only-Guide-Winning-Strategy-Youll/dp/0312353634/sr=1-2/qid=1170116551/ref=pd_bbs_sr_2/105-4836161-3465234?ie=UTF8&s=books

Bob

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55468 of 76398
Subject: Re: Bonds? Date: 1/29/2007 10:53 PM
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How do most feel about bonds...

Speaking only for myself, I do not like bonds.

Most people think bonds are safer than stocks, they are merely less volatile. That is, have less fluctuation in price. Bonds can default depending on the company that issued them. I'm sure Enron looked safe at some point. For safety through diversity you'd need $$$$$ or a bond fund. A bond fund can lose your principle just as fast as an equity fund, so no improvement there.

If you're wanting a fixed income return or to just decrease your portfolio volatility, either ladder CDs or use a money market fund. The difference in return is minimal when weighing all factors, IMHO.

JLC

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Author: stratton2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55469 of 76398
Subject: Re: Bonds? Date: 1/29/2007 11:27 PM
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Book suggestion: The Only Guide to a Winning Bond Strategy You'll Ever Need: The Way Smart Money Preserves Wealth Today by Larry E. Swedroe and Joseph H. Hempen

Larry Swedroe posts over in the Morningstar Vanguard Diehards group at diehards.org. Lots of good stuff. BTW he *hates* junk bonds so you can skip that subject with him. However, if you're a risk taker he suggests you consider commodities funds keeping in mind they are risky.

OTOH Rick Ferri author of "All about Asset Allocation" likes junk bonds, but wouldn't touch commodities with a 3.048 meter pole.

Paul

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Author: stratton2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55470 of 76398
Subject: Re: Bonds? Date: 1/29/2007 11:35 PM
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Most people think bonds are safer than stocks, they are merely less volatile.

Hah, try emerging market bond funds. Talk about junk. They are as volatile as stocks.

Here's a chart of Fidelity New Markets Income FNMIX (emerging market), S&P 500, and Vanguards Lehman Aggragate Bond Index VTMFX.

http://finance.yahoo.com/q/bc?t=my&s=FNMIX&l=on&z=m&q=l&c=vtmfx&c=%5EGSPC

The big dump in 1998 for FNMIX is when the Russians said "Nyet" and repudiated foreign bond investors.

Paul

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55474 of 76398
Subject: Re: Bonds? Date: 1/30/2007 9:29 AM
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If you're wanting a fixed income return or to just decrease your portfolio volatility, either ladder CDs or use a money market fund. The difference in return is minimal when weighing all factors, IMHO.

This certainly seems to have been so for the recent past. I've often wondered what the data shows about long-term (say 40 years) for money market funds and top performing investment grade bond funds. I'm getting to the point where I need to start thinking seriously about putting about 25% of my portfolio in some type of fixed asset fund or whatever.


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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55481 of 76398
Subject: Re: Bonds? Date: 1/30/2007 2:00 PM
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If you're wanting a fixed income return or to just decrease your portfolio volatility, either ladder CDs or use a money market fund. The difference in return is minimal when weighing all factors, IMHO.

JLC

------------------------------------------------------------------------

That goes against history. Corporate bond funds have historically outperformed short term fixed income like MMF.

Bond funds are more liquid than CDs. The penalties from early withdrawal often is substantial.

Plus CDs may be unavailable in retirement plans.

Money market funds are doing well now but the yield curve will return to normal. Or at least it's supposed to.

Of course stock funds provide the best returns.

buzman




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Author: dougdoogle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55483 of 76398
Subject: Re: Bonds? Date: 1/30/2007 2:47 PM
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Consider individual bonds. Buy them from a broker in multiples of about $1000. Hold them until they mature. That way the interest rate is set as of the date of purchase.

Disadvantages include:

Value decreases as interest rates rise. However, that doesn't matter if you hold to maturity.

If the company goes bankrupt, you may lose it all. However, if the company comes close but doesn't go bankrupt, you get all your money at maturity. Compare that to owning the company's stock in a near bankruptcy.

Doug



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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55485 of 76398
Subject: Re: Bonds? Date: 1/30/2007 3:56 PM
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Disadvantages include: also

The often hidden costs of trading individual bonds. IE the spread between bid and ask.

If you hold to maturity you don't get clipped but once.

buzman


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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55486 of 76398
Subject: Re: Bonds? Date: 1/30/2007 4:04 PM
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Back in the late 1990's as I approached my retirement year, I diversified amongst multiple income securities that from then up until now, are providing most of our household income. At that time I considered individual bonds, but elected not to go that route, as I found that individual bonds purchased from the broker's inventory with the mark-up they carry and the bond brokerage commissions made this income-class simply too expensive for the risk-adjusted yield they provided. I haven't checked since then, but I have read where the deep discounters (like Schwab, E-Trade and Fidelity) have developed a more efficient method of purchasing and remarketing bonds.

Although many of them are horribly over-bought, you might want to look at preferred stocks which are kind of bond surrogates and have far greater liquidity (most do).

And if reliable income is what you seek, I would not look to mutual funds, particularly closed-end funds, as most of them gradually reduce their dividends over time.

BruceM

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