Bonds or stocks?

[wasCB14]

Two other thoughts:

1. Long-term bonds can be as volatile as stocks. Bondholders generally have priority over equity holders in liquidation, but even if the payments are all on time, holding bonds if and when interest rates rise a lot can be painful.

2. It takes a bad bear market to really know how much volatility you can stomach...and objectivity to remember it. Many people say they can handle risk when the market is happy, but then say they need to be conservative when things go bad.

[Anonymous]

Go for stocks rather than bonds

[wa3more]

right now , stocks no questions.

Rates are artifically low due to fed and will be going up for a while and this bond bubble, which is starting to deflate, will burst. Might be one of the larger bubbles ever created. Avoid bonds all together.

[Steelersboy]

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@wasCB14 wrote:

Two other thoughts:

1. Long-term bonds can be as volatile as stocks. Bondholders generally have priority over equity holders in liquidation, but even if the payments are all on time, holding bonds if and when interest rates rise a lot can be painful.

2. It takes a bad bear market to really know how much volatility you can stomach...and objectivity to remember it. Many people say they can handle risk when the market is happy, but then say they need to be conservative when things go bad.

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That's if you don't hold them to maturity.

[wasCB14]

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@Steelersboy wrote:

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@wasCB14 wrote:

Two other thoughts:

1. Long-term bonds can be as volatile as stocks. Bondholders generally have priority over equity holders in liquidation, but even if the payments are all on time, holding bonds if and when interest rates rise a lot can be painful.

2. It takes a bad bear market to really know how much volatility you can stomach...and objectivity to remember it. Many people say they can handle risk when the market is happy, but then say they need to be conservative when things go bad.

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That's if you don't hold them to maturity.

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Well, even if you do hold long-term bonds to maturity and get all your coupons and principal, inflation can take a big bite out of their real value. Earlier this year, 30-year Treasuries were yielding 2.11% (they currently yield 3.06%). 30 years is a long time for at least one potential period of high inflation.

[wa3more]

most small investors will invest in bonds via a bond fund and will lose money going forward as rates rise.

[Steelersboy]

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@wasCB14 wrote:

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@Steelersboy wrote:

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@wasCB14 wrote:

Two other thoughts:

1. Long-term bonds can be as volatile as stocks. Bondholders generally have priority over equity holders in liquidation, but even if the payments are all on time, holding bonds if and when interest rates rise a lot can be painful.

2. It takes a bad bear market to really know how much volatility you can stomach...and objectivity to remember it. Many people say they can handle risk when the market is happy, but then say they need to be conservative when things go bad.

---

That's if you don't hold them to maturity.

---

Well, even if you do hold long-term bonds to maturity and get all your coupons and principal, inflation can take a big bite out of their real value. Earlier this year, 30-year Treasuries were yielding 2.11% (they currently yield 3.06%). 30 years is a long time for at least one potential period of high inflation.

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I-bonds would work well in that case.

[wa3more]

in an environment like the one we are in, where rates are going up and will continue to go up, any bond investment will do poorly. I think bonds will underperform compared to other investments the next couple/few years as rates increase to a more natural level.

[wasCB14]

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@Steelersboy wrote:

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@wasCB14 wrote:

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@Steelersboy wrote:

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@wasCB14 wrote:

Two other thoughts:

1. Long-term bonds can be as volatile as stocks. Bondholders generally have priority over equity holders in liquidation, but even if the payments are all on time, holding bonds if and when interest rates rise a lot can be painful.

2. It takes a bad bear market to really know how much volatility you can stomach...and objectivity to remember it. Many people say they can handle risk when the market is happy, but then say they need to be conservative when things go bad.

---

That's if you don't hold them to maturity.

---

Well, even if you do hold long-term bonds to maturity and get all your coupons and principal, inflation can take a big bite out of their real value. Earlier this year, 30-year Treasuries were yielding 2.11% (they currently yield 3.06%). 30 years is a long time for at least one potential period of high inflation.

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I-bonds would work well in that case.

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Since November 1, 2016, the fixed portion of the composite rate on I-bonds is 0%. There is the inflation part of the coupon, but that's federally taxable (unless you use the interest for education). You're guaranteed to lose after taxes and inflation.

[Anonymous]

stocks