GMB Ep #78: Investing Myths Debunked #1: Rising Rates Will Crush Your Bond Portfolio

Recently, we’ve seen quite a few myths and misconceptions about investing circulating in popular media and amongst investors. Today’s episode is the first of several episodes we plan to publish with the focus of debunking these myths. Throughout today’s episode, Grant debunks the misconception of negative effects on bond portfolios caused by increasing interest rates on bonds. Stay tuned until the end of the episode, where Grant shares his take on how to get the best outcomes from bond portfolios. 

 

 

Show Notes

[01:58] Understanding Bonds – Grant reviews how bonds work and how they’re different from stocks. 

[07:30] Interest on Bonds – The structure of interest for bonds and how the concept of duration comes into play. 

[10:35] Fluctuation of Prices – Grant shares his thoughts on why fluctuation of bond prices does not have a significant effect on long-term investors. 

[13:18] Interest Rates – Grant reviews how increasing interest rates affect long-term portfolios, using an example of a worst-case scenario. 

[18:39] Path to Success – Grant shares his thoughts on why consistently applied strategy and long-term focus are the keys to the best outcomes for bond portfolios. 

[20:33] Unlikely Outcomes – Why it’s highly unlikely that we’ll see a huge rise in interest rates in the next five to ten years based on how our current monetary system is structured. 

 

Resources

What is the Worst Case Scenario for Bonds?Cullen Roche:
pragcap.com/what-is-the-worst-case-scenario-for-bonds 

Bond Duration:
en.wikipedia.org/wiki/Bond_duration 

Don’t Ditch Those Bonds
aarp.org/money/investing/info-09-2013/dont-ditch-those-bonds.html 

Episode 69: Interest Rates Are Rising....Does That Mean You Should Adjust Your Bond Allocation?

Episode #69: Interest Rates Are Rising….Does That Mean You Should Adjust Your Bond Allocation?

 
The Federal Reserve recently announced that they are going to maintain very low short-term interest rates for bonds over the next couple of years. On the other hand, long-term interest rates seem to be rising in recent weeks. We dedicated this week’s episode to reviewing how a savvy investor may respond to these developments. Throughout the episode, we discuss how bonds work, the risks associated with bonds, interest rates, why bonds are a crucial element of a healthy portfolio, and more. Stay tuned until the end of the episode, where Grant talks about why having non-US-denominated bonds could be beneficial to you.Continue reading