Comments on: Bonds aren’t for young people

By: hh

hh — Tue, 09 Oct 2007 23:52:17 +0000

Bonds are great outside of retirement accounts, especially for young people, as they will be needing that money for their downpayment on their new house.

By: Sean Harnett

Sean Harnett — Thu, 18 Jan 2007 07:25:19 +0000

Hey Ramit, have you read The Intelligent Investor? Warren Buffet has called it “by far the best book about investing ever written”. The book recommends approximately an equal split between stocks and bonds, for everybody. Not just old or rich people.

By: Emil Elgaard

Emil Elgaard — Wed, 15 Nov 2006 14:48:44 +0000

I’d say bonds are okay. It depends on your temper. Although bonds are usually the saftest choice you can get in them in more or less speculative variations. Junkbonds/High Yields bonds are for example more speculative than bluechip stocks in my opinion.

Bonds however are great if you have an amount of money you wont need for a couple of years, say 2-5. Generally you get more by putting them into stocks but if you really need to make sure that you have the money when you need it, bonds are they way to go. And I mean governmentbonds, not junkbonds.

By: Jonathan

Jonathan — Wed, 27 Sep 2006 20:35:17 +0000

Some experts say the stock market is only gonna average 6% and some others say we’re about to hit a big boom again.

I’ll think long term and stick with index funds. I’m not in the business of guessing.

By: cmadler

cmadler — Tue, 26 Sep 2006 14:15:05 +0000

I was going to make a point about the value of negatively correllated asset classes, but several people beat me to it.

The second positive point about bonds is that over the next several decades they may outperform stocks. Most bonds are offering at least 5-7%. Many experts expect that over the next several decades stocks will return about 4-6%, far lower than they have over the last several decades. Growth consists of real growth (the rise of companies earnings and dividends), inflationary growth, and speculative growth (increase in the public’s desire to own stocks). In the long run, real annual growth in corporate EPS has averaged 1.5% to 2%. I have seen figures saying that dividends are abou 1.4% right now. So barring any speculative growth, stocks will provide a real (inflation-adjusted) return of about 3%. I do not believe there will be any speculative growth in the next several decades, and this is where most of the growth of the last few decades has come. With the growth of 401k and 403b accounts, more people are putting more money into stocks, and bidding up their prices (P/Es were at all-time highs a few years ago, and continue to be very high). With the retirement of the baby boomers, this flow of money will slow and then reverse. If anything, we may see a speculative decline! So it may be unrealistic to expect more than 4-6% from stocks over then next 20 years. At that level, bonds are quite competitive.

By: finance girl

finance girl — Sun, 24 Sep 2006 01:00:02 +0000

Wow, that’s advice I would NOT give to anyone. Perhaps bonds should not make up over 20% of a young person’s asset mix, but they absolutely do have a place in a young person’s asset mix! Perhaps you instead are referring to “bonds don’t belong in a young person’s retirement account?” which makes more since but is still a fallacy imo.

By: finance girl

finance girl — Sun, 24 Sep 2006 00:59:28 +0000

By: Carlin

Carlin — Fri, 22 Sep 2006 22:24:29 +0000

TS: Your previous statement was that investing in the stock market is pure gambling, and that is what I was addressing. Because Warren Buffett is a better investor than the average person doesn’t make him lucky, which is what he would have to be if the stock market was like a slot machine. He proves that people can generate consistent returns by following an investing philosophy and doing research. If you don’t speculate in the stock market, then you aren’t gambling.

By: Jonathan

Jonathan — Fri, 22 Sep 2006 21:16:53 +0000

Index funds are pretty simple too, Hawk. If you have not looked into them I’d recommend it.

By: Hawk

Hawk — Fri, 22 Sep 2006 16:58:02 +0000

Sort of on topic:

Bonds are simple.

The stock market is not.

I already worked hard for my money, why should I have to work hard to invest it so it ‘works for me’ ? I have money and I dont’ want to *lose* it. I don’t want to have a second job of messing around with the stock market to maximize my capital gains and whatever people do when they actually know what they’re doing. I’m not a financial advisor, I’m a technical support rep and a software tester.

I thikn that’s probably where the allure for things like bonds come in. They’re not risky, they take little effort.