The History of Bonds & Bond Funds
Investing in various Bonds and Bond Funds has always been considered a less-risky way of investing than being in the equity (stock) markets.
It’s been the “turtle’s way” of making money, and a way to avoid the excitement and anxiety of the roller-coaster equity rides.
For many investors, Bonds make a great, albeit imperfect, way to fixed investing rather than CD investing, which underperforms the rate of inflation.
However, there has always been a risk to investors who have invested in Bonds and Bond Funds.
Bonds & Bond Funds Today
For the most part, the returns of these products have produced single-digit returns over the last three to five years. Luckily, because the prices of energy dropped during the Trump Administration as fracking and energy independence grew.
And, except for precious metals, virtually all commodity prices also dropped in the last three years.
But this situation has all changed.
What to Expect
With the announcement of the closing of the Keystone Pipeline, the closing of public lands for oil and gas development (fracking), awful national weather and general fear in the marketplace, the price of energy has increased dramatically. Gasoline at the pump is expected to increase by $1.00 a gallon.
And once energy prices increase, then trucking prices increase and then all commodity prices increase—thereby causing inflation.
The prices of bonds have a direct inverse relationship to inflation: as pressure increases to raise interest rates—and they have already increased at the wholesale and mortgage level—bond values will drop.
So, the most conservative investors will see an eroding of the values in their portfolios.
So - what can conservative investors do with the ugly head of inflation just beginning to pop up?
Bond investing can be much more complicated than just finding alternatives to CDs. Ask for professional help.
As always, I look forward to meeting with you over the phone or virtually through Zoom.
All my best,
I have always been impressed with individuals, irrespective of race, religion or political affiliation, who spend their lives as trailblazers, especially as we live in the world of criticism for stepping out of the mainstream.
Putting his politics aside, the former talk-show host remained in the number one slot in all of radio for 30 straight years, roughly 1/4 of the time that radio has actually been around. He changed the face of talk radio, probably forever. He was sarcastic, funny, punny and critical of the status quo, loved and hated.
As someone who thinks of himself as having a good sense of humor, witty and well-read, I appreciate and admire others who remind me of me, or remind me that I can be better.
Thank you Rush.