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I've only just recently begun to try to understand this fixed income stuff, as I approach retirement.

Cheers,

Well, that makes two of us, the part about “trying to understand this fixed-income stuff” anyway, because I’m already retired. LOL.

The reason I write is that it is my way of trying to understand ideas. Yes, investing can be done in very simple ways, and that can be a very effective approach (as opposed to trying to match complexity with complexity.) But every trade-off has consequences, and if some efficiency is gained by making a simplification in one place, you can be sure that its cost will pop up somewhere else.

A classic example of this is to assume that investment returns distribute normally (aka, that returns can be described with “bell-curve” mathematics). Most of the time that simplification works well. In fact, a whole advisement industry has grown up on the basis of making that assumption. But when the assumption fails, the results can be disastrous. That’s fine if one is an institutional investor and is assured that the government will be bailing you out. (“Privatize gains; socialize losses.) But if you’re a small investor, you’ve got to keep yourself out of trouble, or else you’ll get thrown out of the game. Hence, your first consideration has to be risk-management.

The mistake most investors make is to think that if they can avoid the risk, they have managed it. So that’s where I depart company from most fixed-income investors. I accept the fact of risk and try to apply to bonds an approach that works well for stocks, namely classic value investing. I’ve taken to doing the slightly obnoxious thing of posting my ongoing results to hammer on two facts: #1, this stuff is doable with very small money. #2, no one has to suffer the pitiful returns currently offered by principal-protected instruments.

For sure, when CDs and such go on sale, they should be bought by the truckload. But when such instruments are over-priced, alternatives need to be found. But unless one has the skills to invest elsewhere, the person is going to make a mess of it and merely reaffirm for themselves the reasons why they never invested those alternatives in the first place. So, for them, low interest-rate environments are a lose-lose proposition. But for those who have made the effort to extend their investing skill set, the low-interest times are merely a part of customary market cycles.

Be assured that there is a considerable and thankful audience out here.

I’m guessing you’re making that remark because yet another person on my “Ignore” list has launched yet another personal attack on me. I have no idea what they might have said, because I can’t see their remarks to read them. There’s a well-respected newsletter writer, Richard Russell, who was recently feted at a retirement dinner. In looking back over his 50 years of commenting on markets, he had this to say: “When you get it right, everyone will take credit for your ideas. When you get it wrong (even though you are later vindicated), everyone calls you a fool (or worse). If you say what you have evidence for, you’re going to make enemies. So if you want to write about investing and you need a friend, get a dog. If you need two friends, get two dogs.”

I’m not a dog person (nor a cat person) and my friendships don’t depend on finding them here at TMF. Investing isn’t a team sport, nor am I a team player. I write, because I can benefit from working out my ideas in a public forum. The cost of that benefit is a lot of people who are angry with me, because I’ve stepped on the toes of their ill-founded beliefs. But the cost of that hostility can be diminished by putting them on my Ignore list. So that’s the tactic I use. As fast as anyone has demonstrated their intention to deliberately misunderstand me, they get put on my Ignore list. I assume they would have the common sense to do the same. So if what I write for myself has possible benefits to others, I’ll post it and leave it to everyone to read or ignore as they choose. But as Thomas Paine once quipped, “Common sense isn’t very common.” So they read what I write and tie themselves into emotional knots all over again. Meanwhile, I’m focused on what interests me. Those, as you say, who find that my path runs parallel to what they are exploring find possible benefit, too.

But kind words are always appreciated. So, thanks. Charlie
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