Bonds: The Nerds In High School You Should Have Befriended
Whenever any of us decides to tune into the financial media to see what’s going on and learn possible places to invest our money, all we hear about is stocks—such and such stock is hot, such and such is not, and so on—however, you rarely hear about...
Summary
Whenever any of us decides to tune into the financial media to see what’s going on and learn possible places to invest our money, all we hear about is stocks—such and such stock is hot, such and such is not, and so on—however, you rarely hear about bonds. I guess they’re not as interesting as stocks. Bonds are pretty stable, mostly pay a fixed interest rate, and mature sometime in the future, so they’re kind of boring.I’m not going to argue that point. They are and should be boring— that is the point—which is why they hold a valuable place in the diversification of your hard-earned money.But, ah, here’s the rub. We all know that interest rates are low, right? You can borrow money to buy a home and pay under 4%. That’s a loan to you for 30 years at under 4%. It’s ecstatically low! So it’s one thing to borrow money at a low rate, but if you lend the money at a low rate, it looks less attractive.By the way, lending money is the definition of a bond. When you own one, you are, in fact, lending money to someone or some entity. Take Apple, for example. This year, Apple issued $12 billion worth of bonds that mature in 30 years. The interest rate you would receive if you bought it is 4.65%. Would you loan someone money for 30 years for 4.65%? Let’s say you were unsure if Apple was going to be around in 30 years for you to get your money back. Let’s say you only wanted the safest security on the planet. That would be US Treasury Bonds. Right now the yield on the 30-year US Treasury bond is 2.3%. After taxes and inflation, you are actually losing money. So, as interest rates continue to be low, bonds do not look attractive to most investors.As investors know, central banks are keeping rates low, low, low to ward off the risk of recession in an uncertain environment. Despite on-again off-again expectations of tightening from the U.S. Federal Reserve, benchmark rates seem likely to stay pretty much where they are for some time to come.Even so, the collapse in yields worldwide has left U.S. corporate bonds as one of the last places on earth to get relatively safe, steady income. So while investors fret over low-interest rates and low payouts, the relative attractiveness of U.S. corporate debt has drawn in billions of investor cash. That could be a boon for American businesses who, like Apple, can borrow almost unlimited amounts to drive their competitive advantage in a global marketplace.And this low-interest rate scenario means bonds are expensive because bond prices go up as rates drop in an inverse relationship. And for individual investors, who have to pay transaction costs, yields are even lower.So a natural response might be to look beyond bonds and concentrate on dividends. For example, if you buy an S&P 500 type index fund that concentrates on the higher dividend paying companies, you can get around a 3% yield, which isn’t bad for a diversified income play compared to traditional fixed income options. Individual stocks can offer even higher yields, of course, and you don’t have to go crazy with risk-taking to find them. For instance, a lot of banks offer dividend yields north of four percent.But it’s when you get greedy that the troubles with non-bond income generators might start to appear. There is always the risk of dividend cuts and other unforeseen issues that accompany the uncertainty of certain investments, like stocks and real estate.This might sound counter-intuitive after noting how low bond yields are, but the uncertainty of dividend yields only highlights the real value and role of bonds. At the most basic level, in a well-constructed portfolio, bonds are there to diversify risk. After all, when stocks do poorly, bonds usually do betterSo while you should goose your portfolio with solid income-generating dividend stocks, investors should not give up on safe-haven bonds, despite the low yields,
First published
07/20/2016
Genres
Duration
4 minutes
Parent Podcast
The Steve Pomeranz Show
View PodcastSimilar Episodes
-
The Pomeranz breakout, why Ozuna underperforms, and whether Castellanos can field – Season 5, Ep., 34
11/15/2019
Host Mike Petriello and national editor Matt Meyers look at why it made sense for Atlanta to sign Will Smith, note the incredibly impressive feats of Drew Pomeranz, wonder why Marcell Ozuna keeps underperforming, and investigate whether Nicholas Castellanos can play credible defense. To learn more about listener data and our privacy practices visit: https://www.audacyinc.com/privacy-policy Learn more about your ad choices. Visit https://podcastchoices.com/adchoices
Clean -
9/22/22 Steve Jones Show Hour 1
09/22/2022
9/22/22 Steve checks in with the local high school round table.The post 9/22/22 Steve Jones Show Hour 1 first appeared on Steve Jones Show.
Clean -
9/21/22 Steve Jones Show Hour 2
09/21/2022
9/21/22 Steve examines today’s Play-by-Play of the Yankees game.The post 9/21/22 Steve Jones Show Hour 2 first appeared on Steve Jones Show.
Clean -
9/21/22 – Steve Jones Show Hour 1
09/21/2022
9/21/22 Steve talks on how streaming services are messing with how to catch upcoming games and Steve speaks with Brian Tripp about his experience on the side lines.The post 9/21/22 – Steve Jones Show Hour 1 first appeared on Steve Jones Show.
Clean
Similar Podcasts
-
The Women In Business Radio Show
08/11/2020
Women In Business Radio Show
Tune in for fun, inspiration and unfiltered discussions as host Sian Murphy interviews down-to-earth businesswomen sharing ideas, tactics and stories. Regular features include recommended books, tools, lessons learned and top tips for business.For information about being a guest on the show, newsletters and more visit...https://thewomeninbusinessradioshow.com/linksBecome a supporter of this podcast: https://www.spreaker.com/podcast/the-women-in-business-radio-show--1228431/support.
Clean -
Marketing Madness by the Bridges Twins
08/11/2020
Marketing Madness by the Bridges Twins
On the Marketing Madness show we tackle challenges submitted by our listeners....and we have fun sharing the solutions. When you want to find answers to those burning questions that Google can't quite help you with, this is your show. With experiencing ranging from development of large scale web applications, managing 7 figure+ monthly Adwords accounts, working in the Fortune 500, co-authors of 3 books and much more you can submit us any challenge and we will tackle it. Listen in, have fun, grab a coffee and join us today.
Clean -
RNG Show
08/18/2020
RNG Media
Every season of Survivor we draft the castaways onto separate teams in a fantasy league and see who among us can form the ultimate team that will outlast the rest. Join us every week as we run through major events from the latest episode and make strategic trades to edge out the competition.
Clean -
High Profits Reviews and After Show - AfterBuzz TV
08/18/2020
AfterBuzz TV
The High Profits After Show recaps, reviews and discusses episodes of CNN's High Profits.Show Summary: Two entrepreneurs try to build the first marijuana franchise business.
Clean -
SOUND OF THE UNDERGROUND
08/15/2020
SOUND OF THE UNDERGROUND
Podcast by SOUND OF THE UNDERGROUND
Clean -
SCORCHING ARYes - (TRANCE SHOW)
08/15/2020
ARYA (Jignesh Shah)
SCORCHING ARYes - ( TRANCE SHOW ) is a monthly Trance Podcast with the newest / best Progressive , Uplifting & Driving Trance. One hour non-stop mix with " ARYA ( Jignesh Shah ) " Track has been selected from his favorite artist Like John O'Callaghan , Armin van Buuren , Aly & Fila , Ashley Wallbridge , Sean Tyas , Standerwick , ReOrder , Darren Porter and many more..Supported by : Aly & Fila , Bjorn Akesson , Ben Nicky , Black Hole Recordings , Bobina , Ferry Corsten , FSOE ( Future Sound of Egypt ) , Jochen Miller , Ministry of Trance , OMNIA , Raz Nitzan Music , Standerwick , Susana Vocalist , Trance Attack ... you can Leave your request at.. scorchingaryes@gmail.comFor more updates-http://www.facebook.com/djaryaproductionhttp://www.facebook.com/SCORCHINGARYesPodcast
Clean -
Depression Detox Show | Daily Inspirational Talks
08/12/2020
Malikee Josephs (Muh Leek - Jo Seffs)
Get UNSTUCK. Be inspired by the best motivational, inspirational, and brain health experts to live a happier and more purposeful life! Join host Malikee Josephs Monday through Friday for your dose of motivation. If you’re struggling with feelings of unhappiness, loneliness, emptiness, anxiety, sadness, grief & loss, or not having a sense of purpose, this show is for YOU! ——————If you are in need of medical care, please consult with a therapist or physician.If you are in a crisis or thinking of harming yourself, please call the National Suicide Prevention Lifeline 1-800-273-8255. Calls are private and confidential. CDC Mental Health recommendation pagehttps://www.cdc.gov/mentalhealth/tools-resources/index.htm
Clean -
Rock The Walls
08/12/2020
idobi Network
Always on the frontlines, Rock The Walls is hosted by music fan and devoted radio host Patrick Walford. Over one thousand interviews are already in the can—from being the first ever radio interview for bands like I Prevail & The Story So Far, to speaking with heavy & alternative music legends such as The Used, Anthrax, Parkway Drive, Godsmack, Korn, Sum 41, Bring Me The Horizon, A Day To Remember, and hundreds more.After doing the show for over a decade, hosting Warped Radio, bringing you your idobi Music News, and Music Directing idobi Howl, along with hitting the road for coverage on the Warped at Sea Cruise in 2017 & the final Vans Warped Tour in 2018, Walford is a long trusted voice in the music scene. Tune in to hear in-depth interviews you won't hear anywhere else with all your favorite heavy & alternative artists, along with spinning the best in new music.
Clean -
Ask The Gluten Free Chef
08/15/2020
The Gluten Free Chef
Podcast where questions pertaining to gluten free living, gluten free eating, and celiac disease are discussed, dissected, and laid bare.
Clean -
Cokie Roberts: Capital Dames
08/11/2020
The Huntington
Author and political commentator Cokie Roberts discusses her new book Capital Dames, The Civil War and the Women of Washington, 1848-1868, which explores the lives of the women of Washington D.C. during the upheaval of the Civil War. Roberts has previously written about the vital female contributions to the nation's early years in her New York Times bestselling books Founding Mothers and Ladies of Liberty.
Clean -
STAR WARS The Vintage Rebellion Podcast
08/11/2020
The Star Wars Vintage Rebellion Podcast - SWTVR - Podcast Team
The Star Wars Vintage Rebellion Podcast is brought to you by five vintage Star Wars Toy collectors. The team discuss vintage star wars collectibles, recent threads and stories from across social media and forums, the current vintage market, oddball items, as well as covering stories that have been rocking the vintage collecting community. There are also interviews with all types of collector as well as an events section where you can discover Star Wars events in your area. All this plus much much more, so download this podcast now!
Clean -
Retro Blissed
08/12/2020
The Network
Two gamers with a love for the history of video games play and discuss the best and worst titles in existence. Blow out your NES cartridge, check the batteries in your remote, and memorize your Game Genie codes… It’s time to get RETRO!
Clean
Discussion (0)
No comments yet
Be the first to share your thoughts about this episode!