A recent email from a Wealthy Retirement reader stated that bonds don’t pay enough to make them worth owning.
Most of you know I am the bond guy at The Oxford Club, and I’m sure you can imagine how generalizations like this drive me nuts!
To begin with, anytime you hear someone say bonds, they are talking about Treasurys. Not munis, corporates or anything else, just Treasurys. Because that’s the only thing the money press covers – Treasurys.
What exactly does it take to retire? Once you get there, what are the biggest challenges retirees face? How should your money be spread out?
Bond Strategist Steve McDonald talks to two Oxford Club Members about the issues retirees face today.
The most recent numbers on aging indicate that a lot more of us will reach 100 years of age than we suspect.
In fact, the first person who will reach the age of 150 is alive now and walking around.
If you haven’t taken the time to think about how much it costs to live 30 or 35 years without a job, maybe now is the time.
Today is a “lecture you guys day,” so get ready.
Nobody can seem to talk about anything but a bubble in stocks, or stocks are overvalued, or the similarity between 1987 and now.
So what!
The vast majority of retired investors ignore bonds, all bonds. Not because they are risky; just the opposite is true. And not because they don’t pay enough; some actually beat the stock market.
No, the reason is they don’t know enough about them to make a rational choice.
The least understood investments are not options, stocks or even commodities: they are bonds. And this lack of bond knowledge is costing retired folks a lot of money in income, capital gains and losses in stocks they shouldn’t own.
I don’t know about you but I am really tired of the nonstop predictions by the money press and the media of a crash or market correction. Now there is even one out there about corporate bonds.
If I have learned one thing in the past 30 years it is when the TV and money press talk about something, especially a sell-off as much as they have been recently, it has already happened or it isn’t going to happen. Not for a while anyway.
Here’s something that, as the Club’s bond person, I never thought I would be talking about.
Gold in a bond portfolio as a hedge against increasing interest rates
First, if you haven’t started to restructure the fixed-income portion of your investments to accommodate increasing rates, you aren’t paying attention. And that’s irresponsible.
This week’s 2 Minute comes in the form of a warning about some stocks. A recent Barron’s article focused on a trend in stock picking that should be a big red flag for all investors… especially the retired.
The article cited 163 companies being recommended by analysts that have already exceeded their target price. That means the stocks are still buys, but have moved past the target price the analysts listed when they recommended them.
As stocks inch their way back to all-time highs, one industry that has yet to recover is steel. Yet, as the industry drags, host Steve McDonald sees a huge opportunity.
A very dangerous and costly trap is developing in the debt markets and it is pointed right at retired investors.
Since the end of January, record amounts of money have been pouring out of stocks and into bonds. But this is not the usual flight to safety.