What is the point of having bonds in your porfolio? They don't pay anything, maybe just enough to cover inflation. I understand that it's suppose to provide stability, but I think of the tremenous money lost in earnings had they been invested in stocks, mutuals funds, REITS. Even a GIC would seem better, since it provides a guaranteed rate, and no possibllity of losing anything. I currently hold 10% in bonds, but according to the general rule, I should have 50% of my investments in bonds. That sound absolutely insane, as I still have 40 years to live.
bonds, yes or no?
- Thread starter stinkynuts
- Start date
Buy junk bonds! That's where the money is! Of course that's if you want to risk your money. Government bonds are safe and boring. As you said, right now they don't offer a lot of ROI. However, if inflation starts to rise, they will become much more attractive for your portfolio.
I invest in some bonds using the td e series couch potato method. If I remember correctly every month I get money paid as a dividend and reinvested into that bond fund. while I may not be getting a high return it is nice to get a monthly reinvestment back into bonds·.
Not too exciting, but I am less than 5 years to retirement, so not dont want to be all equity.
Hold about 30% bonds.
About 2/3 of that is a wide mix of US bonds as AGG, and the Canadian side is in XQB.
Cannot yet see the benefits of buying ladder of individual bonds.
About 15% of out equity holdings are in a managed preferred shares fund, HPR.
Preferred shares in my eyes are kind of wolves in sheep's clothing. Bond like more than raw equity.
Hold about 30% bonds.
About 2/3 of that is a wide mix of US bonds as AGG, and the Canadian side is in XQB.
Cannot yet see the benefits of buying ladder of individual bonds.
About 15% of out equity holdings are in a managed preferred shares fund, HPR.
Preferred shares in my eyes are kind of wolves in sheep's clothing. Bond like more than raw equity.
The problem with bonds is that they provide less interest then inflation, so, you are actually losing money. If you really want to play it safe, buy commodity ETFs.
For a period of the early 2000's I though bond rates were heading lower, so I sold my bond positions at the time and instead used the RRSP cash to buy a self directed mortgage to assume the debt my house had outstanding, to cancel the bank mortgage. Took about $2k to set up and $200 a year in admin costs.
Day to day me started with a 140K mortgage, and paid it off at a 5% interest rate, which was classed as competitive at the time to rrsp me.
Once it got small enough that the admin fees were beginning to drag, day to day me paid an early break penalty to rrsp me to close out the investment, and as a side effect get more assets to work inside the RRSP..
It would not work so well now with mortgage rates so low, but it played well for me. When mortgage was paid wife had gone back to work after kids were 3 and 5. We toolk off the same amount from chequing and kept it being transferred to the investment account each month. .
Day to day me started with a 140K mortgage, and paid it off at a 5% interest rate, which was classed as competitive at the time to rrsp me.
Once it got small enough that the admin fees were beginning to drag, day to day me paid an early break penalty to rrsp me to close out the investment, and as a side effect get more assets to work inside the RRSP..
It would not work so well now with mortgage rates so low, but it played well for me. When mortgage was paid wife had gone back to work after kids were 3 and 5. We toolk off the same amount from chequing and kept it being transferred to the investment account each month. .
Just one question: if you believed the rates were heading lower, why did you sold the bonds? When rates go down, bond prices go up, so, you should have bought the bonds, not sold them.
But paying the mortgage interest to myself instead of the bank was very satisfying and profitable, compared to the bond yields.
Well, investing in bonds with unpaid mortgage is the worst thing to do regardless of the interest rates
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