Time to invite Bonds to the party?

If idyllic thoughts of a world at peace, stable oil prices, 2% inflation and caring politicians have not crossed your mind recently, you might want to consider a discussion about bonds, instead.

Let me start by pointing out that I haven’t written about, discussed, recommended, or otherwise thought about bonds for years now. Because, with historically low interest rates and with the probability of capital loss should interest rates rise, it just didn’t make sense. In addition, many bond managers had no choice but to flock to “high yield” (read: risky) bonds to boost the low yields offered by Government and high-quality corporate bonds.

By the way, a brief digression. It’s highly possible that your Balanced Fund took a beating on both the equity and bond allocations last year. Just something to think about.

But how things have changed? Central Banks, having painted themselves into a dead-end with a protracted low-interest policy, had no option but to raise interest rates. In the hope that this might dampen an over-heated, inflationary economy.

This brings me back to this discussion about bonds. The significant interest rate rise over the past year caused bond prices to fall, raising yields as a result. So finally, bonds seem to make sense again as a complementary investment to equities. And very much tied in with my investment philosophy that it’s not “what you buy, but when you buy” that’s the key to financial success.

If you wish to discuss a bond fund, invested in investment-grade bonds with a current yield in excess of 8%, ideal for RRSPs, RRIFs and TFSAs, feel free to call me at 613-230-5895 or e-mail me at yosman@argosynet.ca.

P.S. If you’re not sure what constitutes an investment-grade bond, just ask me.

Best regards,