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Inadvisability of bonds

By Terry Savage on May 21, 2021 | Investments

You delivered a very well-designed and executed 1-hour seminar at the invitation of NY Life.
A portion of your comments strongly intimated that bonds — even high-grade bonds — were not a particularly good investment.
What would you recommend as an alternative to bonds in a well-designed retirement portfolio? (currently I’m invested in the markets in a 70/30 stock to bond ratio).

Terry Says

I really wanted people to understand an issue with bonds that I have written about several times over the years (search my columns at my website, using “bonds’) for a full explanation. The problem is that when interest rates rise, bond prices fall. And if you need to sell, you could take a loss.

There is nothing wrong to having a high quality bond component to your portfolio, but I would keep the maturities at maximum 10 years and stagger the maturities so that when the shorter term debt matures, you can reinvestat higher rates — if I’m correct that rates should rise because of inflation and our continuing government issuance of debt.
And I’d also advise some inflation hedges, like gold stock mutual funds in that balanced portfolio.



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