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Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that "The time to buy is when there's blood in the streets." http://www.investopedia.com/articles/financial-theory/08/con...

There wasn’t much blood in the streets in the summer of ’08. But that was a good time to be buying Ford’s debt. I picked up some of their 6.35’s of ’14 at 53.50, for a projected YTM of 20.5%. Now that the issue is being called, my YTM will bump up to 33.8%. That’s not the best of yields. But it’s an appropriate reward for the risks taken, and that is as much as any bond-investor can ask.

It would be foolhardy to stuff one’s portfolio with too many such issues. But it’s true financial stupidity to avoid them entirely. Supposedly-safe, passive, fixed-income, beta bets will never provide a real-rate of return after taxes and inflation, on average and over the long haul. Some credit-risk has to be accepted. Ironically, doing so reduces both over-all losses and over-all volatility. In other words, the net-effect of running a properly-diversified bond-portfolio is higher, steadier, more-assured returns than those achieved by the overly-cautious, the overly-timid.

So that’s the task and goal, building a “goldilocks” portfolio that takes on enough risk, but not too much, so that market-beating returns are consistently achieved, year after year, decade after decade. "Balance" and "Timing". Those are the keys to investment success. Buy what should be bought, when it should be bought, in the amount it should be bought, just as Ben Graham advised.
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Supposedly-safe, passive, fixed-income, beta bets will never provide a real-rate of return after taxes and inflation...

Charlie,

In previous posts you've mentioned that you calculate a personal rate of inflation. I think this is a useful approach, but there are some practical issues that I've run into -- how detailed to get with the calculation, how to distinguish changes in consumption from changes in price, how to deal with lumpiness, and so on. I'd be interested in hearing how you went about calculating your personal rate of inflation.

Thanks,
Bill
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