If you haven’t heard, bonds are risky in 2013. Tom and Brendan discuss why you should be taking caution if you are investing in bonds. Tom points out that in the past bonds have been relatively secure investments, while stocks were fairly hazardous. Right now the opposite of that is true. Since interest rates have been dropping for decades now, bonds are risky in 2013. Any increase in rates will bring a severe loss of principal in bonds. If you are currently worried about bonds, this video is for you.
Have you ever heard of an inverse relationship before? You probably learned about them back in high school math class at some point. Anyway, when talking about bond values it is important to understand this concept. Your bond value will drop whenever bond yields go up. Tom talks about this concept in the video this week. He also talks about scenarios in which those who have money in bonds will be alright. If you plan on holding bonds until they reach their maturity date, then you will likely be alright. Also if you did not pay a large premium rate for your bonds, you should be alright. The main issue is that most investors don’t plan on holding bonds until their maturity date.
Make sure to watch this week’s Mullooly Asset Management video to find out why bonds are risky in 2013.
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