Why Buy Bonds If Interest Rates Will Rise?
by Hildy Richelson and Stan Richelson
Many individual investors wish to buy bonds to achieve a secure cash flow and to reduce their risks in the stock market.
However, with interest rates at a low level, some investors are concerned that after they purchase bonds, interest rates will rise and their bonds will decline in value. We examine the validity of this concern, certain alternatives to bonds and our proposed solution to low interest rates.
You should not have to wait until the end of this article to get to our proposed solution to the low interest rate problem: We propose a bond ladder of individual bonds structured to take into account your financial needs and objectives. The bond ladder will finesse the possibility of rising interest rates. A bond ladder will also enhance your appreciation of the value of cash flow and power of compound interest.
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Stan Richelson is a representative of Scarsdale Investment Group, a registered investment adviser based in Blue Bell, Pennsylvania, that specializes in fixed-income investments. Stan and Hildy Richelson are co-authors of several books on bonds, including “Bonds: The Unbeaten Path to Secure Investment Growth,” Second Edition (Bloomberg Press, 2011).