Finance, Boats, Retirement how do you decide?

[backinblue]

Dont turn over your money with anyone named Bernie madoff.
I know of one man who had to sell his multi-million dollar condo, his 2 cars and move in with his married daughter.

The interesting part is, he never complained while he was getting those fantastic returns but, he sure did complain when they dried up over night.

I handle my own investments. Sitting on my hands and doing nothing, since 97 the gross increase has been 5 times.

Thanks Dan, and I am in the same "boat" but others here would rather tell you that you are wrong and about to lose everything. Carry on.

 

[BandB]

I view the investing world quite different than most of your Financial Advisers. Personally, I find most Financial Advisers are short sighted and are only knowledgeable on 1/4 of what I consider financial investments.

I would add, not to depend on any financial adviser. I can show you bankrupt athletes who felt they had great financial advisers. You must know and understand all your investments. If it sounds too complicated, the problem isn't you, it's the adviser. Your plan should make sense to you. It must.

Some advisers want to appear geniuses digesting such complicated information that a normal person like you could never figure out. Call that out for the BS it is. They should know more because they have more time, but none of it is complicated. Do not ever give them trading rights. You must understand and authorize any trades. It's your life.

I recommend not just multiple types of investments, but multiple brokerages, all low cost. If you use a financial adviser, read a lot and question him and I'd even suggest considering using two. If someone suggests something and your response is "I'm not comfortable investing in that" and they continue to pressure you, get up and leave.

I've had to tell three brokerages I use for trades not to have specific individuals ever call me again.

Your investments should mirror you, reflect your risk tolerance, reflect what interests you. They should even reflect your beliefs and morality. The big payouts come from investing in pre-revenue ventures and even those that have never turned a profit. I can't do it. I can't bring myself to invest in vision with nothing concrete behind is. Doesn't matter. That's why I'm not on the ground floor of any of the great risers. I'm not in on the ground floor of marijuana dispensaries, but then I don't invest in Tobacco companies. I don't invest in cruise lines. Now, I'm sure through funds I have some of all these things, but not directly.

Use your dreams, but also use your fears. If your greatest fear in life is to have less income than you do today, then you just decided the mission for your investments. Develop a plan and follow it, modify along the way.

 

[CharlieO.]

We figured if we are going to be poor might as well be poor with a boat.

 

[backinblue]

BandB I agree with you on advisers. A friend and coworker had someone he trusted completely and was convinced that this guy was sincere and would take good care of his investments. I never met him and he may very well been a great guy, but turned out giving some very bad advice. I guess my point is that even the best and most honest advisers can be wrong and cost you alot. I'd rather be in control and have myself to blame if things go wrong.

 

[catalinajack]

As previously posted. I did just that. Played with other peoples money on several boats. But things change depending upon how important having a boat is to your quality of life and your income stream. My income is my investments. I’m fully retired. Due to licensing requirements there’s no chance I’m ever going back to work. My ROI greatly exceeds current loan interest rates but I still paid cash to built my house and buy my boat. It’s important to me and my wife we always have a boat and a house. Having paid cash regards of what my portfolio does we know we will always have both and have sufficient funds to enjoy both. There’s virtually no chance we will outlive our money nor decrease our quality of life.
There’s something to be said for decreasing your obligations/your monthly nut. When doing the multifactorial analysis to determine the boat purchase budget we assumed no income stream(in fact 40% lose of net worth of portfolio with negative net yields from selling assets) and all expenses being draw from capital and obligate payments from long term investments (bonds, pensions annuities etc.) Social security isn’t enough to consider. The foundation of having this level of peace of mind is eliminating all loans and mortgages. Considered the boat as having no worth but rather a 10% of purchase price annual draw in the calculation. So my descendants will get less money. That is true. But I don’t have to worry about money as long as I live.

The point I was trying to make was more directed at folks who have the cash to fully pay for a house and/or boat and still live comfortably. If you have that cash, why not keep it invested and have that money working for you rather than dumping it all into fixed assets? There would be nothing preventing you at any point for any reason from paying off your loans. Instead, your money is earning nothing. Makes no sense to me. And, as I said earlier, if paying cash means withdrawing money from cash-deferred accounts, that is just plain nuts.

 

[FWT]

The best advisor can be wrong. They often are.

You can be wrong. You often will be.

Its one thing to be wrong, and another thing to be stubborn about it.

No one can predict the future.

Weather forecasts are useful but don't forget to look at the conditions out the window.

Optimists will plow ahead on the theory the winds will change to more favorable. Pessimists will power down in favorable winds on the theory the winds are about to get bad. Realists set their sails to whatever the wind conditions are.

 

[angus99]

I made a killing years ago buying a few thousand dollars worth of Apple at a historic low and selling it after it doubled! Felt like the Oracle of Omaha had nothing on me!

(current value if I’d held on to it: $2.4M.)

 

[backinblue]

The point I was trying to make was more directed at folks who have the cash to fully pay for a house and/or boat and still live comfortably. If you have that cash, why not keep it invested and have that money working for you rather than dumping it all into fixed assets? There would be nothing preventing you at any point for any reason from paying off your loans. Instead, your money is earning nothing. Makes no sense to me. And, as I said earlier, if paying cash means withdrawing money from cash-deferred accounts, that is just plain nuts.

It depends. By paying cash you are avoiding interest on a loan. Leaving the money invested and working for you would need to return more than the loan rate to be worth it. As an extreme example, if you are paying 21% on credit card debt and you have money in savings to pay it off you should. It's unlikely that keeping that money invested will earm more than 21%.

 

[Hippocampus]

Will present the counter argument to using a financial advisor.

Burnt out and sold business, office condo, land rights to the commercial zoned property it sat on (several lots) and paid off all debt. Also had inherited assets and turned them into liquidity (planned over time to avoid taxes). Hired a independent financial advisor. Although he has trading relationships with various houses he is not a employee of any. Rather he is truly independent. His business model is simple he is paid a very small fraction of your gain in net worth with corrections based on corrected dollars indexed to the time you entered the relationship. If I made no money neither did he. More my net worth increased more he made. My net worth isn’t confined to the markets alone. He has 40 clients who he vets before deciding entry. That’s it never more than 40. He is the nexus of all aspects concerning finances. Tax accounting, lawyers, real estate and durable goods, estate planning, contract lawyers, insurance etc. In short any and all aspects of your life that may effect or be part of your financial picture. After multiple sessions (which are repeated) we discuss changes in our lives, desires, and understanding what we want to do in the future. Given the amount of assets he controls he has clout and the halo of return business to the various ancillary support professionals (accountants, lawyers etc.). He is assessing their performance on an ongoing basis. Through out our relationship these individuals have been changed on occasion. Several times I’ve needed very specific services. He knew who was good and had the clout they would 1. take the job 2. at reasonable cost.
This relationship allowed me to give him (and various family members) power of attorney to various aspects of my life. This allowed me to totally and completely bug out. Although we would contact him via satphone or secure internet time to time I knew even in the absence of interactions things were on autopilot. That included construction of a zero footprint house and its subsequent management, all mail including interactions with government, banking , various real estate transactions and management of other assets.
For a decade if we never had any interactions with him things would run just fine. In fact when off grid cruising would go months ignoring our land life. Now back in the states but still interact when need requires. A pretty stress free life. Yes, at random times engage a outside forensic accounting firm to take a look see. Even after 20+ year relationship still do that.
In summary if you hire a financial advisor to manage your portfolio perhaps you’re wasting your time. Your financial life is much more than your portfolio. My financial advisor is the coach of a team of many professionals . He’s paid if we win the game. His incentives are the same as mine. He has lifted a burden from me and has given me access to the best and brightest of those professionals. He has minimized costs and maximized gains while decreasing risks to a level I find acceptable.
In short independent financial advisors are a different kettle of fish than those associated with any of the big houses. Sure you need to vet closely and reassess performance periodically. But the freedom this relationship has given me has paid off in many multiples of its cost.

 

[backinblue]

Will present the counter argument to using a financial advisor.

Burnt out and sold business, office condo, land rights to the commercial zoned property it sat on (several lots) and paid off all debt. Also had inherited assets and turned them into liquidity (planned over time to avoid taxes). Hired a independent financial advisor. Although he has trading relationships with various houses he is not a employee of any. Rather he is truly independent. His business model is simple he is paid a very small fraction of your gain in net worth with corrections based on corrected dollars indexed to the time you entered the relationship. If I made no money neither did he. More my net worth increased more he made. My net worth isn’t confined to the markets alone. He has 40 clients who he vets before deciding entry. He is the nexus of all aspects concerning finances. Tax accounting, lawyers, real estate and durable goods, estate planning, contract lawyers, insurance etc. In short any and all aspects of your life that may effect or be part of your financial picture. After multiple sessions (which are repeated) we discuss changes in our lives, desires, and understanding what we want to do in the future. Given the amount of assets he controls he has clout and the halo of return business to the various ancillary support professionals (accountants, lawyers etc.). He is assessing their performance on an ongoing basis. Through out our relationship these individuals have been changed on occasion. Several times I’ve needed very specific services. He knew who was good and had the clout they would take the job at reasonable cost.
This relationship allowed me to give him (and various family members) power of attorney to various aspects of my life. This allowed me to totally and completely bug out. Although we would contact him vis satphone or secure internet time to time I knew even in the absence of interactions things were on autopilot. That included construction of a zero footprint house and its subsequent management, all mail including interactions with government, banking , various real estate transactions and management of other assets.
For a decade if we never had any interactions with him things would run just fine. In fact when off grid cruising would go months ignoring our land life. Now back in the states but still interact when need requires. A pretty stress free life. Yes, at random times engage a outside forensic accounting firm to take a look see. Even after 20+ year relationship still do that.
In summary if you hire a financial advisor to manage your portfolio perhaps you’re wasting your time. Your financial life is much more than your portfolio. My financial advisor is the coach of a team of many professionals . He’s paid if we win the game. His incentives are the same as mine. He has lifted a burden from me and has given me access to the best and brightest of those professionals. He has minimized costs and maximized gains while decreasing risks to a level I find acceptable.
In short independent financial advisors are a different kettle of fish than those associated with any of the big houses. Sure you need to vet closely and reassess performance periodically. But the freedom this relationship has given me has paid off in many multiples of its cost.

Hippo, good for you and I don't see how anyone could argue that you did not do the right thing. I haven't done a lot of research, but I think it's rare to find someone who will only work for a % of gains. More normally it's a % of assets under management. It's still better for them if your assets increase in value, but they get paid regardless. An average fee is likely in the 1-2% range which can be a lot of money added up over a retirement period.

 

[smitty477]

It depends. By paying cash you are avoiding interest on a loan. Leaving the money invested and working for you would need to return more than the loan rate to be worth it. As an extreme example, if you are paying 21% on credit card debt and you have money in savings to pay it off you should. It's unlikely that keeping that money invested will earm more than 21%.

It seems foolish to pay cash for a boat when your conservative investments out earned the loan intertest rates by nearly 20%.
Why would you choose to do lose those gains?

 

[backinblue]

It seems foolish to pay cash for a boat when your conservative investments out earned the loan intertest rates by nearly 20%.
Why would you choose to do lose those gains?

Like I said, it depends....

It depends on the interest rate on the loan vs. how much you THINK you can earn by investing that money. A fixed rate loan is guarenteed, a gain on investments is not unless you are in something like a CD which is likely paying less than the loan interest amount. Rates are historically low, so I would tend to agree with you. If a loan rate was 10%, you could argue that earning an average of more than 10% over a number of years may be difficult. By paying cash you are not "choosing to lose gains". If you take out a loan you are gambling that your future gains will supass the loan rate.

 

[BandB]

Will present the counter argument to using a financial advisor.

Burnt out and sold business, office condo, land rights to the commercial zoned property it sat on (several lots) and paid off all debt. Also had inherited assets and turned them into liquidity (planned over time to avoid taxes). Hired a independent financial advisor. Although he has trading relationships with various houses he is not a employee of any. Rather he is truly independent. His business model is simple he is paid a very small fraction of your gain in net worth with corrections based on corrected dollars indexed to the time you entered the relationship. If I made no money neither did he. More my net worth increased more he made. My net worth isn’t confined to the markets alone. He has 40 clients who he vets before deciding entry. That’s it never more than 40. He is the nexus of all aspects concerning finances. Tax accounting, lawyers, real estate and durable goods, estate planning, contract lawyers, insurance etc. In short any and all aspects of your life that may effect or be part of your financial picture. After multiple sessions (which are repeated) we discuss changes in our lives, desires, and understanding what we want to do in the future. Given the amount of assets he controls he has clout and the halo of return business to the various ancillary support professionals (accountants, lawyers etc.). He is assessing their performance on an ongoing basis. Through out our relationship these individuals have been changed on occasion. Several times I’ve needed very specific services. He knew who was good and had the clout they would 1. take the job 2. at reasonable cost.
This relationship allowed me to give him (and various family members) power of attorney to various aspects of my life. This allowed me to totally and completely bug out. Although we would contact him via satphone or secure internet time to time I knew even in the absence of interactions things were on autopilot. That included construction of a zero footprint house and its subsequent management, all mail including interactions with government, banking , various real estate transactions and management of other assets.
For a decade if we never had any interactions with him things would run just fine. In fact when off grid cruising would go months ignoring our land life. Now back in the states but still interact when need requires. A pretty stress free life. Yes, at random times engage a outside forensic accounting firm to take a look see. Even after 20+ year relationship still do that.
In summary if you hire a financial advisor to manage your portfolio perhaps you’re wasting your time. Your financial life is much more than your portfolio. My financial advisor is the coach of a team of many professionals . He’s paid if we win the game. His incentives are the same as mine. He has lifted a burden from me and has given me access to the best and brightest of those professionals. He has minimized costs and maximized gains while decreasing risks to a level I find acceptable.
In short independent financial advisors are a different kettle of fish than those associated with any of the big houses. Sure you need to vet closely and reassess performance periodically. But the freedom this relationship has given me has paid off in many multiples of its cost.

I fully understand what worked for you and can agree with most of it. However, I would never give an advisor power of attorney. Not going to happen under any conditions for me. While the arrangement with him may be working well for you, the arrangement you have is absolutely the type arrangement that athletes and celebrities have been devastated by.

I would advise you to regularly change forensic accountants so fresh eyes are examining.

 

[smitty477]

Like I said, it depends....

It depends on the interest rate on the loan vs. how much you THINK you can earn by investing that money. A fixed rate loan is guarenteed, a gain on investments is not unless you are in something like a CD which is likely paying less than the loan interest amount. Rates are historically low, so I would tend to agree with you. If a loan rate was 10%, you could argue that earning an average of more than 10% over a number of years may be difficult.

In your case you have posted that your funds are conservative and you have never had problems investing within funds.
You also said you bought your boat at the same time for cash ...when rates were in the area of 4% or less.
Why would you pay cash when your conservative investments were yielding 20% plus or minus more?

 

[backinblue]

In your case you have posted that your funds are conservative and you have never had problems investing within funds.
You also said you bought your boat at the same time for cash ...when rates were in the area of 4% or less.
Why would you pay cash when your conservative investments were yielding 20% plus or minus more?

For the exact reasons I stated. The fact that the market went up over 20% in the last few years is great, and it's true if I invested the boat money it would have grown a lot in that time. But there is no guarentee what the future holds. I made the decision at that point in time approaching retirement age to not want to have a boat payment to worry about. Hindsight is 20/20. What if the market went down 20% a year over the last few years? Then my decision would have been genius. And there is still no right or wrong because we don't know the future. The market could tank 50% next week from some unforseen event. I still believe that the market is the best investment for the long-term. But for a boat that I might only own for 5 years, that's not a long time and a severe market correction could take years to recover. Also 4% on a used boat sounds low to me, but I didn't shop so I don't know. I'm sure others here know best what rate you should expect to pay today.

 

[smitty477]

For the exact reasons I stated. The fact that the market went up over 20% in the last few years is great, and it's true if I invested the boat money it would have grown a lot in that time. But there is no guarentee what the future holds. I made the decision at that point in time approaching retirement age to not want to have a boat payment to worry about. Hindsight is 20/20. What if the market went down 20% a year over the last few years? Then my decision would have been genius. And there is still no right or wrong because we don't know the future. The market could tank 50% next week from some unforseen event. I still believe that the market is the best investment for the long-term. But for a boat that I might only own for 5 years, that's not a long time and a severe market correction could take years to recover.

Does not really sound conservative with this new description above.
Why have 'all' retirement accounts in these funds then?
Have you moved funds now or will you remain a buy and hold with existing funds?
Approaching retirement age typically calls for a more conservative holding.

 

[backinblue]

I never said I have "all" my investments in certain places. I have my own strategy, right or wrong and yes it is different now than it was 10 years ago. I don't think TF is really the place to go into details on retirement investment strategies for each of us. We all have uniquie situations, there is no on size fits all.

 

[smitty477]

I never said I have "all" my investments in certain places. I have my own strategy, right or wrong and yes it is different now than it was 10 years ago. I don't think TF is really the place to go into details on retirement investment strategies for each of us. We all have uniquie situations, there is no on size fits all.

"I never said I have "all" my investments in certain places."
This is what you said....

"I've never had bad luck investing in mutual funds and stock indexes. It's easy to pick apart anyone's particular investment if you want to. I'm happy that the value of my retirement fund tripled in the last few years with relatively consevative investments, including paying cash for my current boat."

 

[backinblue]

"I never said I have "all" my investments in certain places."
This is what you said....

"I've never had bad luck investing in mutual funds and stock indexes. It's easy to pick apart anyone's particular investment if you want to. I'm happy that the value of my retirement fund tripled in the last few years with relatively consevative investments, including paying cash for my current boat."

Is there a point or just sour grapes?

 

[smitty477]

Is there a point or just sour grapes?

I see no reason for sour grapes at all - do you?

I just see that your original descriptions change over time.

 

[BandB]

I don't think TF is really the place to go into details on retirement investment strategies for each of us. We all have uniquie situations, there is no on size fits all.

We all evolve to our investment strategy too. Often it's based on our backgrounds.

It's like the arguments over debt free vs. borrowing when interest rates on loans are lower than returns on investments. I hear it all. I can calculate it all. My wife and I can't do it. We have been debt free most of our adult lives. We rented and saved until we could afford a house and then bought inexpensively. It doesn't matter how logical or sensible financially it might be, we have no emotional tolerance for debt.

Similarly, our accountants annually will present us with ideas for tax reduction from offshore investment to tax effective US investments. They feel obligated and we expect them to do so, even though we know and they know, we'll not do any of it. We will remind them of when their foolproof scheme backfired for them and many clients about 20 years ago.

Investment strategies are just a part of your life vision. You really can't look at them without looking at all your goals for the future. Then I encourage best case strategies, normal strategies and contingent strategies for the worst case. Even some very difficult subjects. Not just the illness and major medical costs, but death. What would each of you want to do if your partner died. I know many here have suffered through that and many others through divorces. You can only figure out investment strategies after you've figured out what is truly important in your life. We love boats, Fanatics about them. However, they are not the most important things in our lives.

 

[backinblue]

I see no reason for sour grapes at all - do you?

I just see that your original descriptions change over time.

Not really, maybe just your interpretation of what I said. I never said I have "all" my investments in one place and just because I've done well recently, as anyone should who is in the market, I never said that I expect 20%+ gains year over year. I think you are making assumptions w/o knowing every detail, which I doubt anyone here but me really cares about or should. I've tried to answer your questions, but I don't think you are really listening.

 

[backinblue]

Nicely stated BandB. Maybe I'm not as articulate in trying to say a lot of the same things.

 

[Hippocampus]

When power of attorney is granted it’s for a specific transaction or event. Like you I don’t give anyone including family a standing power of attorney. Hence unlike the individuals you mentioned my exposure is minimal. I’ve granted such task specific powers to attorneys as well as him from time to time. In his case as regards net worth I’m probably in his lower 5%. His exposure if he misused such a task specific grant his is significant . Our relationship is decades old so mutual trust remains.

 

[Hippocampus]

BandB we hold about a year of our calculated annual expenses as cash. Although most is in USD much is not. The world doesn’t catch cold the way it used to when the US sneezes. Between that and income generated by currency trading perhaps worth thinking about. Unlike timing the market it’s seems less complex. To the point computer trading using a modest fraction of cash holdings has been successful for us. Other than that do no day trading anymore.

 

[OldDan1943]

Folks, I have read 175 messages and have come to the conclusion that each of us invest, sell, trade within our comfort zone.
Nothing I say will change anyones' strategy nor would I expect it to change or influence any decisions you will make.
I wish us all great success and good fortune.
I shall now exit this thread.

 

[backinblue]

You are exactly right OD. Nobody should advise or take financial advice about investment strategies on a boating forum or any other forum for that matter. You are correct that we are all unique in our own situations and outlooks and nobody should try to convince us otherwise. See you on the next thread!

 

[BandB]

BandB we hold about a year of our calculated annual expenses as cash. Although most is in USD much is not. The world doesn’t catch cold the way it used to when the US sneezes. Between that and income generated by currency trading perhaps worth thinking about. Unlike timing the market it’s seems less complex. To the point computer trading using a modest fraction of cash holdings has been successful for us. Other than that do no day trading anymore.

I don't really do any form of active trading, just buy and hold and then sell. I agree on the world economy, just I'm in the US so only time I deal in other currencies is buying boats and we do some wholesale in other currencies. So far, I've just preferred to avoid any additional taxing jurisdictions.

 

[FWT]

As much as this topic has been exhausted, I thought I would throw more gas on the fire.

I am reviewing sectors, sector funds, stocks, etc. tonight. In the broad market, what is working and what isn't. What comes to mind is some of the undercurrent themes in this thread. So I thought I'd share.

SAFE returns as opposed to MAX returns is one underlying theme in a number of posts. The point I want to make is, what may SEEM safe may not be.

The example I want to make is bonds vs. bond funds. Someone, perhaps B&B but I'm not going to try to look it up, said to shy away from bond funds. I held back from agreeing at the time, just to not clog things up.

IF you buy a bond, or bank CD, what you get is what you sign up for. A yield of X% for Y Period. Hold to maturity, and all things equal you get your money back at the end and earn whatever rate you sign up for.

IF you buy a bond fund, that isn't the case. Bond prices and market value goes up as yields go down, and vice versa. A fund holds a basket of bonds. As a fund investor you have a share of the basket. Every day your share is marked to market. Your fund has no maturity, so if rates go up and stay up you have a permanent capital loss.

At the moment bond yields are spiking up hard, and market values of bonds are tumbling. This is causing significant upset in the high PE tech world causing such stocks to get hit pretty hard.

So you think you have diversified by buying a bond FUND? Think again, because both your bond fund and your tech stocks are going down together.

On the other hand, as techs tumble that cash is going into safety (not bonds). Among the groups being bought are utilities. Yields better than bonds, and deemed (at the moment) as safe. The Utes are not immune to the impact of rising rates, but so far more so than bonds.

Here is a chart of one popular bond EFT. Depending on your timeframe of the hold its either down or flat. You could do as well taking that money and stuffing it into your sock drawer. Or better by doing that.

https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=ief&x=57&y=14&time=9&startdate=1%2F4%2F1999&enddate=12%2F17%2F2013&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=8

Here is a popular utility ETF. Better yield. Smoother. More calm. Until it isn't.

https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=VPU&x=0&y=0&time=9&startdate=1%2F4%2F1999&enddate=12%2F17%2F2013&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=8

More than you want to know.

 

[BandB]

As much as this topic has been exhausted, I thought I would throw more gas on the fire.

I am reviewing sectors, sector funds, stocks, etc. tonight. In the broad market, what is working and what isn't. What comes to mind is some of the undercurrent themes in this thread. So I thought I'd share.

SAFE returns as opposed to MAX returns is one underlying theme in a number of posts. The point I want to make is, what may SEEM safe may not be.

The example I want to make is bonds vs. bond funds. Someone, perhaps B&B but I'm not going to try to look it up, said to shy away from bond funds. I held back from agreeing at the time, just to not clog things up.

IF you buy a bond, or bank CD, what you get is what you sign up for. A yield of X% for Y Period. Hold to maturity, and all things equal you get your money back at the end and earn whatever rate you sign up for.

IF you buy a bond fund, that isn't the case. Bond prices and market value goes up as yields go down, and vice versa. A fund holds a basket of bonds. As a fund investor you have a share of the basket. Every day your share is marked to market. Your fund has no maturity, so if rates go up and stay up you have a permanent capital loss.

At the moment bond yields are spiking up hard, and market values of bonds are tumbling. This is causing significant upset in the high PE tech world causing such stocks to get hit pretty hard.

So you think you have diversified by buying a bond FUND? Think again, because both your bond fund and your tech stocks are going down together.

On the other hand, as techs tumble that cash is going into safety (not bonds). Among the groups being bought are utilities. Yields better than bonds, and deemed (at the moment) as safe. The Utes are not immune to the impact of rising rates, but so far more so than bonds.

Here is a chart of one popular bond EFT. Depending on your timeframe of the hold its either down or flat. You could do as well taking that money and stuffing it into your sock drawer. Or better by doing that.


More than you want to know.

Excellent explanation. Bond funds have been called equity investments in fixed income. Even one person said masquerading. Defeat the whole purpose of bond investing. On the other hand, we bought municipal bonds in 2012 with 5% interest rates. Since they're tax free that's the equivalent of 7.9% fixed income.

Now they are the ultimate buy and hold investment. Unfortunately though current yields are more in the area of 2-2.5%. In fact, I saw trades on one 2030 bond at $129. More typical right now is around $115. Still tempting, but not what we have them for.