No. of Recommendations: 2
LONGREITS,

Allocation recomnedations for any asset-class suffer from three problems:

#1 They tend to be driven by erroneous assumptions about how markets work, e.g, the total garbage that is Modern Portfolio Theory.
#2 They tend to ignore the unique needs (and skills) of the investor.
#3 They tend to ingore "where the puck is going to be next."

Forget about reading anything. Instead, try doing some thinking. "What am I trying to accomplish? What is a feasible way to do it?" If you really do have $500k or better to work with, then there is almost nothing you can't do responsibly in the bond world. So the real question becomes, "How much work do you want to do to create and then maintain such a portfolio?" But you have already prejudiced your options by asking the question as you have. Instead, pose to yourself this problem. "I've got X dollars I could put to work. I'd like Y sort of return, with Z sort of risk/effort/assuredness. What are my choices?"

Think, think, think. That all this investing stuff is. "Hmm, This looks interesting. I wonder if I can make it work for me?" You've got good fundamentalist skills. So, basically, there's almost nothing in the conventional investing world you couldn't explore and turn into a success. That's an envious position to be. Use the opportunity wisely.

Think, think, think. What you do most want to do? What would be the most fun to do? What would be the most responsible thing to do? What choice offers the best combination of reward for effort, fun for effort, and no more than reasonable grief? It might be bonds. It might be something else. It might be two things, but I would strongly advice that you don't attempt three. And the advice that's typically given about "diversification" is a crock. What's needed is "risk-management" for which (and within which) diversification can be a tool. But focusing on the latter, to achieve the former, is letting the tail wag the dog.

If your interest and needs really do dictate that bonds are your path, then you need to ask yourself where we are in terms of the long-term trends. Unless you intend to trade from both sides of the market, the linked chart should suggest that you're very late to the party and you're likely to be fighting head winds for the next 20 years. http://finance.yahoo.com/echarts?s=^TYX+Interactive#symbol=^...

OTOH, pull charts for commodities and ask how long in the tooth they are by comparison, and then read the post by Quillpen and follow the links. In particular, pull the term sheet for the POS Commodity CD that Everbank is selling. Dump the data for each commodity into Excel and start asking yourself what they are really selling you and how easy it would be to do a responsible knock-off in which you set the floors and ceilings for yourself. http://boards.fool.com/laurora-piece-of-cake-lets-peruse-the...

In other words, would it be possible to create a synthetic bond that offered a modest but still reasonable return, while at the same time you average into the "normal" bond market as opportunities arise?

Charlie
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.