Should You Have Bonds in Your Investment Portfolio?
Many people love the income and relative safety bonds provide, but other people hate them. It’s important to understand why investors love and hate bonds. Should you have bonds in your investment portfolio?
Are You Getting High Interest Rates on Your Dollar Deposits?
The good old days of getting high interest rates on your dollar deposits may be coming back. Consider the pros and cons of investing in bonds as opposed to FDIC insured CDs.
Want to Boost Your Monthly Investment Income?
One way to boost monthly investment income is using bond funds. There are different types of bonds funds, read more to learn if they are appropriate for your financial situation.
How To Squeeze More Dollars Out Of Your Investments
Want to increase your investment income. Can using bonds squeeze more dollars out of your investments? Learn why retirees frequently choose to invest in bonds.
Are bonds safe as an investment? Explore how they can provide safety and increase diversification in an investment portfolio
Corporate or Treasury Bonds: Which Bonds Are Better?
Corporate and Treasury bonds each have advantages. Which should you include in your investment portfolio?
Is there a safe investment that carries little risk?
Bonds are often described as a “safe investment” since, compared with other investments, they have a smaller risk of losing principal. However, just because some people call them “safe,” that does not mean they cannot lose money. Bonds are popular because they distribute interest payments on a set schedule, providing a reliable source of predictable income.
When choosing which bonds to buy, investors can select issues according to their individual risk tolerance – higher yields often correlate with higher risk. This choice gives investors a sense of control, because they can decide how much they are willing to risk to get a particular interest rate in return.
There are many different types of bonds on the market: Treasury bonds, municipal bonds, premium bonds, junk bonds, and more. In fact, bonds are so popular that the bond market is larger than the stock market!
Bonds, bond funds, and bond ladders can be effective tools in hedging against market volatility. Depending on your specific risk level and financial situation, chances are there is some type of bond program that can meet your needs and goals.
There’s no such thing as a “super safe” investment
It’s important to keep in mind that there are no guarantees. Even though bonds may be a “low-risk” investment, they are not risk-free; investing in bonds and bond funds carries a certain element of risk to your principal. In fact, no investment is 100% safe.
Remember that no two investors are the same. What’s good for one person may not necessarily be appropriate for another. If you are an oleh, you should note that some types of bonds, such as municipal bonds, are generally not appropriate for cross-border investors.
For more specific information about how to begin investing in bonds, and how to determine what type of bonds to buy, download the Profile Bond Toolkit at: Profile-Financial.com/bond-toolkit. It contains a variety of resources that explain how bonds work, and how to determine which bond is right for you.
Can Bonds Increase Income from Your Investment Portfolio?
By Douglas Goldstein, CFP® - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
A retired widow met with me last week to discuss how to increase income from her investment portfolio. I reviewed her account and made some suggestions for restructuring her investments to get predictable income. We spoke a lot about bonds. Here’s why:
Bonds pay a set amount on a fixed schedule, so if you are looking for predictable income, bonds may work for you. A bond’s interest rate is often commensurate with the level of risk; if you buy a “high-yield bond” (or “junk bond”) you get a higher interest rate than if you buy a high-quality bond. A well-designed portfolio incorporates different types of bonds in order to diversify risk and maximize returns, and it reflects the risk tolerance of the client.
Build a bond ladder
Another way to diversify risk while creating a predictable income stream is to use a technique called “bond laddering.” This means you buy a series of bonds with successive maturities, such as one, two, three, four, and five years. When the first bond matures at the end of the first year, you reinvest the principal in a new five-year bond at the prevailing interest rate. The following year, when the next issues matures, you do the same thing. This way, you have ongoing and dependable returns. You can customize the rungs of your ladder (i.e., the amounts of money you wish to invest), the height (meaning the longer and shorter term investments), and materials (types of bonds, like corporate or government bonds) to suit your own personal needs and risk tolerance. Bonds do have risks, so be sure to speak to your financial advisor, or get in touch with my office, to determine which specific bonds may be right for you.
Two videos on bond ladders
Watch two short videos about creating a bond ladder at: www.Profile-Financial.com/bond-ladder. If you have investments in the United States or are interested in receiving dependable income from your portfolio, call my office (02-624-2788).
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates.