Bonds Yesterday and Today
Comment Posted to “A Balanced Approach: Less Risk, But Lower Potential Return,” by Stuart Ritter, CFP, in the December 2011 AAII Journal:
There is plenty of commentary demonstrating the risk-dampening effect of bonds. That is because bonds increase in value when stocks decline, largely because interest rates fall when the economy is suffering. However, my concern has to do with the situation moving forward. With interest rates at historic (and probably unsustainable) lows, it seems that bond investing is much riskier today and over the course of the next decade. Stocks may or may not rise, but it seems that interest rates have only one way to go, which would cause bond values to decline, perhaps sharply. Just food for thought: Is this commentary relevant, considering the bond market of today?
John from Texas
Stuart Ritter responds:
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