Over the most recent weekend during several family, client, and friend gatherings, I had the opportunity to visit several times about investing….a recurring theme kept happening, such the article.
Bonds Can Lose Money
Multiple times over the weekend the subject of bonds not losing money arose. While there are few certainties in investing, if you hold a long-term bond AND interest rates rise, YOU WILL LOSE MONEY IF YOU SELL EARLY….Who really wants to lock in a 30 year bond at 3% today ?
We have no idea when exactly rates will rise or even if they will. If rates rise, and as an investor you are stretching for yield, you will very likely be hurt. When the music stops there may be a fight for the exits.
Safer Investing in Bonds Today
Here are a few keys to help keep losses to a minimum if rates rise. Even in this scenario, losses may occur, although they should be minimal.
- Stay in shorter terms (1-5 years, 7-10 MAX)
- Favor higher quality over lower
- Diversify (Corporate, Muni, Foreign)
On the Road Again
With a flight out tonight, I find myself out of the state and happily, lightly tethered via electronics. I will be back in the saddle in full force next Monday!
Have a great Day and rest of your week!