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.
[01:40] Introduction to Bonds – What bonds are, differences between bonds and stocks, and the role of investment banks in the process of issuing bonds.
[09:56] Risks Associated with Bonds – Grant explains some of the risk factors associated with bonds and why US government bonds are the least risky.
[13:00] Interest Rates – How the long-term and short-term interest rates work and how the interest rates started to change in the last few weeks.
[17:22] Trends – Grant shares his take on what contributed to the recent change in interest rates and what the current situation means for investors.
[21:44] Adjusting Bond Holdings – What you should keep in mind when deciding whether it’s a good idea to adjust your bond holdings due to the recent developments.
[24:15] Diversification Effect – Having bonds in your portfolio helps you survive poor market conditions because bonds have a floor on interest rates. Grant shares his take on why this is important for a healthy portfolio.
Buying Bonds vs. Buying Bond Funds:
7 Ways to Lose Money With Bonds:
Episode #60: This Is Why I’m Concerned About Our Rising National Debt: