I just found your video today and it is amazing! I already subscribed, liked and set notifications to all your videos. I don’t currently own any bonds because I am 36 years old and don’t panic with current volatility due to my investment horizon. but I am planning to start adding 1% each year of a long term treasury bond index fund when I turn 45 and rebalance as needed to keep my target allocation that year. I hope in retirement, age 65, to be 80% stocks / 20% long term treasuries bond for my asset allocation.
Thanks James, you have a talent for breaking things down so we can all understand it. What do you think of EUN3 as a bond ETF for Europeans? Or where do I find the Accumulating equivalent, any idea?
I wouldn’t blindly own a certain percentage of bonds in my portfolio. I would keep a certain amount in CDs to cover expenses over 3 years and the rest in 3-10 year intermediate laddered bond etfs to cover expenses for another 7 years. The rest of my portfolio would be invested in equities for growth. The overall percentage of bonds in the portfolio could vary from 20%-40% over time depending on the portfolio size.
Groucho Marx lost a significant amount in the stock market crash of 1929. When he told his friends he was invested in bonds, they told him he could not make much money investing in bonds. His reply? You can when you own enough of them.😮
Could you make a video about the order in which a company that goes bankrupt pays people? For example, are bond holders paid before preferred stock holders who are paid before common stock holders?
I understand when interest rates go up the price of the bond goes down. Can you speak to the opposite? If buying long-term bonds at 4-5 percent when the Fed pivots won't the value of the bond go up> cant find any info on the math of it if the rates go down 100bp etc and I lock in a 10-year treasury. Great channel.
The opposite is also true, bonds will be worth more if interest rates drop(and the longer duration the more the price change) But I highly recommend against trying to time the bond market
IN a target fund with 40%+ bonds, I'm trying to figure out how to fix this. Should I move my target to my own investments and take initial hit on bonds or just leave it in the target fund of 2025? I tend to think it's heavy on bonds even though I want to retire in the next couple of years.
You could move it to a 2030 target or 2035 target which increasingly invest in stocks until the ratio is where you want. That's the simplest way. There are other more complicated ways of course. Best to you, enjoy your retirement soon!
What is the difference between bonds and CD’s. I keep buying one year CDs because I am getting 3.85% on $300K in one year cd’s I have a 401K but wouldn’t put this cash in there because I already paid taxes on it. I get confused
The difference between bonds and CDs? CDs are Bank products with FDIC protection and bonds are loans to companies or government entities There are two types of CDs, brokerage and regular Bank CDs. Bank CDs can usually be cashed early with a penalty but brokerage CDs if you want your money early at whatever the market will pay for it.
I feel that an attitude of relying on *interest* from bond funds for living expenses is very problematic. You have to chase yield and increase duration when market interest rates fall. Then your principal takes a big hit when interest rates rise again.
I am confused… I-bonds are giving 6.89% interest rate right now and was at 9.62% prior to that (May-October 2022). Is this a bad basket for investment?
Investment? It's generally more like cash savings. Inflation is normally not this high. They are great for cash like investments but long term stocks are better.
You're going to have to be more specific because he talks about both separately and sometimes it could be either one he is talking about. As far as Bonds and bond funds being different. A bond fund is nothing but a collection of bonds. So the only difference is it doesn't act like an individual Bond but a fund of bonds that is constantly rolled over into the type of bonds that the fund perspective dictates (it has no maturity date)
Great job on a complicated topic
Subscribed- you have great info and a great style, I really enjoy the videos!
Great, informative video. Thank you and Happy New Year!
Thanks for tips info in 2022, Happy New year 2023!
Very helpful. Thank you!
I just found your video today and it is amazing! I already subscribed, liked and set notifications to all your videos. I don’t currently own any bonds because I am 36 years old and don’t panic with current volatility due to my investment horizon. but I am planning to start adding 1% each year of a long term treasury bond index fund when I turn 45 and rebalance as needed to keep my target allocation that year. I hope in retirement, age 65, to be 80% stocks / 20% long term treasuries bond for my asset allocation.
Thank you, James. This was a great explanation to help us understand what we need to know as investors.
Excellent.
Very good discussion. However, what is missing is the comparison between holding actual bonds and bond ETFs and the comparison between CDs and Bonds.
Note that , as he suggests, interest risk is irrelevant if you buy and hold to maturity.
Thanks James, you have a talent for breaking things down so we can all understand it. What do you think of EUN3 as a bond ETF for Europeans? Or where do I find the Accumulating equivalent, any idea?
I wouldn’t blindly own a certain percentage of bonds in my portfolio. I would keep a certain amount in CDs to cover expenses over 3 years and the rest in 3-10 year intermediate laddered bond etfs to cover expenses for another 7 years. The rest of my portfolio would be invested in equities for growth. The overall percentage of bonds in the portfolio could vary from 20%-40% over time depending on the portfolio size.
I parked a bit of my winnings in VTIP. Won't be there forever, but pays a nice dividend.
Buying bonds as a mutual fund or etf isn't the same as buying bonds individually outside of an IRA, etc.
Groucho Marx lost a significant amount in the stock market crash of 1929. When he told his friends he was invested in bonds, they told him he could not make much money investing in bonds. His reply? You can when you own enough of them.😮
James, do you actually oversee the investments of your clients, or is that handed off to another entity?
Could you make a video about the order in which a company that goes bankrupt pays people? For example, are bond holders paid before preferred stock holders who are paid before common stock holders?
What about an E bonds??
EE bonds(savings bonds)?
Currently pay 2.10%
Guaranteed to double in 20 years
No state tax
Tax deferral and education tax advantages
I understand when interest rates go up the price of the bond goes down. Can you speak to the opposite? If buying long-term bonds at 4-5 percent when the Fed pivots won't the value of the bond go up> cant find any info on the math of it if the rates go down 100bp etc and I lock in a 10-year treasury. Great channel.
The opposite is also true, bonds will be worth more if interest rates drop(and the longer duration the more the price change)
But I highly recommend against trying to time the bond market
My savings account has gone from 0.50% to 3.3%!!!!!!!!
@@johngill2853 if you hold the bond to maturity is your principal unchanged? Meaning you only take the drop if you sell? Thx!
IN a target fund with 40%+ bonds, I'm trying to figure out how to fix this. Should I move my target to my own investments and take initial hit on bonds or just leave it in the target fund of 2025? I tend to think it's heavy on bonds even though I want to retire in the next couple of years.
I am in the same basic framework with one fund, but have the allocation issue addressed with investment in other stock funds
You could move it to a 2030 target or 2035 target which increasingly invest in stocks until the ratio is where you want. That's the simplest way. There are other more complicated ways of course. Best to you, enjoy your retirement soon!
What is the difference between bonds and CD’s. I keep buying one year CDs because I am getting 3.85% on $300K in one year cd’s I have a 401K but wouldn’t put this cash in there because I already paid taxes on it. I get confused
The difference between bonds and CDs?
CDs are Bank products with FDIC protection and bonds are loans to companies or government entities
There are two types of CDs, brokerage and regular Bank CDs. Bank CDs can usually be cashed early with a penalty but brokerage CDs if you want your money early at whatever the market will pay for it.
So you think a C rating is "likely" to default?
I feel that an attitude of relying on *interest* from bond funds for living expenses is very problematic. You have to chase yield and increase duration when market interest rates fall. Then your principal takes a big hit when interest rates rise again.
If you're using long-term individual bonds instead of a bond fund, then you are still subjecting yourself to substantial "renewal risk".
Just hold to maturity.
I am confused… I-bonds are giving 6.89% interest rate right now and was at 9.62% prior to that (May-October 2022). Is this a bad basket for investment?
Investment? It's generally more like cash savings. Inflation is normally not this high.
They are great for cash like investments but long term stocks are better.
I love me my BONDS....now and in the future
Do you mean bonds or bond funds - they are very different.
You're going to have to be more specific because he talks about both separately and sometimes it could be either one he is talking about.
As far as Bonds and bond funds being different. A bond fund is nothing but a collection of bonds. So the only difference is it doesn't act like an individual Bond but a fund of bonds that is constantly rolled over into the type of bonds that the fund perspective dictates (it has no maturity date)
Bonds have been underwater for almost 11 years.