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I just found out that my father-in-law, in his 80s and retired, is heavy into bonds. He's asking me if, with the strong possibilities of more FED interest increases, should he hold on to the bonds or switch to something else. I'm not into bonds myself. Any strong suggestions on what you would do if you were in his shoes? Thanks.
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No. of Recommendations: 2
If he has BONDS as opposed to bond funds, sit tight. The market has already priced in an interest rate tightening. He bought bonds for INCOME. Each bond is a promise to pay him a set amount of interest every 6 months (probably) for a given number of years, and then to pay him the face amount back when the bond matures. Nothing having to do with interest rate changes has any reflection on the issuer's ability to do just what it promised to do.
It is true that if he has some bonds maturing now while the rates are up, he can buy a new bond at a better rate than he could have a month or so ago, but the price he would get if he sold the old ones is not so good.
Bonds are to be owned, not bought and sold every time the fed blinks.
If your father in law is in his 80s, it is likely that he made the investment for income. He is not that worried about inflation over the next 50 years. His investment was appropriate. Reassure him.
Best wishes, Chris
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