The principles explained in this book may be applied at any time and in any investment cycle, by investors of any age. Changes in bond yields are nevertheless expected to be subdued and contained. Good variable rates are 2. If people have fear of rates rising, you can fix right now and still have cheap money. You may not have to worry about this if you are simply opening an online trading account.
The good news is that, if inflation does become a problem, the Bank of Canada will accelerate increases in the overnight rate and dampen demand, which is actually bullish for bonds long-term because investors see that the Bank is going to fight inflation. Conversely, short-term rates impact things like variable and 1-year fixed mortgages. Most bonds do not trade every day, so they are priced in relation to a bond that does. To accomplish this, I will examine the bond market, what it is, how it functions, and explain the various individual products. I have no problem recommending that. Last but not least, look at how rates have moved coming out of past recessions, and evaluate your risk tolerance for potential 2-4% rate increases this is not our prediction, just something you should be prepared for. The core principles of this book remain unchanged; individual investors, through a laddered portfolio of individual interest-bearing bonds or zero coupon bonds, are able to preserve their principal while obtaining satisfactory returns.
In addition, there are very valuable, retail-investor-friendly investment products called zero coupon or strip bonds that are excellent retirement planning tools; they provide investors with the precise future nominal value of their money. This partly explains why mutual funds are falling from favour and why there has been a marked growth in individually managed portfolios, investment counsellors, and in self-directed individual portfolios. In fact, inflation continues to recede in most places if anything. In Your Best Interest gives you the tools to meet your income and retirement needs by making the retail fixed income market less expensive, more accessible, and more efficient. It has outperformed, and will continue to outperform, the majority of bond mutual funds whose managers charge too much for merely average performance. In turn, this is having an adverse effect on the employment market, as many jobs go unfilled as the mobility of labour is severely hampered by the weakness in the housing market.
I will show you how to achieve solid, certain returns by focusing on a specific strategy and on specific securities. Investors have learned that they cannot rely solely on equity markets for their retirement needs. The investment business fails most individual investors by selling them products inappropriate for their circumstances. Translating this to investment terms, we become fussier and desire individually managed portfolios and more personal attention. Nevertheless, a global economic recovery did get underway but has proven to be a halting, sub-normal one.
In Your Best Interest will put you ahead of the average investor or financial advisor by giving you the tools to demystify the fixed income market and meet your income and retirement needs. What this equity-market volatility has underscored is the need for investors to invest their savings in the different categories of investments appropriate to their ages and circumstances. In Hank's new position of Fixed Income Strategist for Odlum Brown Limited, he will still answer your questions but he will be unable to post them on his site. This, in turn, permits you to conduct technical analyses, which can be of great help in timing purchases and sales. Who could have guessed that these icons would disappear and that hundreds of billions of dollars would be needed to prop up many other institutions, including the likes of General Motors? What else has happened since the second edition is that I joined Odlum Brown Limited as their fixed-income strategist. In Your Best Interest will put you ahead of the average investor or financial advisor by giving you the tools to demystify the fixed income market and meet your income and retirement needs.
January Outlook January 8, 2019 By Hank Cunningham Evidence continues to accumulate that economic growth is slowing, both globally and in North America. He has been a trader, institutional salesman, portfolio manager, and zero coupon specialist. With the return to deficits at all levels of government, there are a lot more government bonds to choose from. In that scenario there is no need for serious tightening. There are wild cards, particularly in the trade sector, but it is difficult to attribute anything to this important area. Hank has more than 40 years of experience in fixed income markets. What am I missing here? Are we talking about the same kinds of rates here? This allows investors to capture the extra yield available in the six- to ten-year maturities, while at the same time the average term of the portfolio is only just over five years.
With a more dovish approach by the Fed and bond yields at the low end of the forecasted range, the yield curve could steepen slightly. We spent a little time with him last week to get his take on rates and the Bank of Canada BoC. Since 1988 he has specialized in the retail space, building and managing three different fixed income trading desks. This is producing problems for investors as money is earning a negative real return. That could mean increasing your net worth and your income, making your retirement portfolio bigger, or allowing you to retire sooner. The events of the past three years certainly underscore the importance of maintaining well-balanced portfolios with the fixed-income portion designed to avoid the four biggest risks to fixed-income portfolios: Maturity risk also known as reinvestment risk Credit risk Inflation Currency All of these factors can be mitigated using a laddered approach; I have long favoured ladders with maturities from one to ten years. Hank Cunningham has over 37 years of experience in all aspects of fixed income markets.
This is not the time to be managing your ladders. As an added bonus, you will know which way bond prices go when interest rates fall! This is probably as cheap as rates are going to be. There are several initiatives underway in the realm of transparency. I am very proud to be associated with them. Yet investors and even many financial advisors know little about it. The principles of preservation of capital and returns on that capital have returned to the forefront of investing, and as retirement draws nearer, investors are starting to realize that fixed-income investments should constitute a healthy percentage of their portfolios.