{"id":30501,"date":"2012-06-27T16:27:26","date_gmt":"2012-06-27T20:27:26","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/06\/unlocking-the-mysteries-of-bond-investing\/"},"modified":"2012-06-27T16:27:26","modified_gmt":"2012-06-27T20:27:26","slug":"unlocking-the-mysteries-of-bond-investing","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/06\/27\/unlocking-the-mysteries-of-bond-investing\/","title":{"rendered":"Unlocking the Mysteries of Bond Investing"},"content":{"rendered":"<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n<div><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-30054\" title=\"Unlocking the Mysteries of Bond Investing\" src=\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/02\/bond-investing1.jpg\" alt=\"Unlocking the Mysteries of Bond Investing\" width=\"220\" height=\"220\" \/><\/p>\n<p>Buying many small, ultra-short bond positions in this market is the only way you won\u2019t get crushed when rates turn back up. Avoid long-term bonds and bond funds.<\/p>\n<\/div>\n<p>Bonds are the answer to most investors\u2019 needs, not their get-rich-quick dreams, but their real needs. So, you\u2019d think the bond market would be doing everything possible to get these survivors of the stock market into bonds\u2026<\/p>\n<p>But they aren\u2019t!<\/p>\n<p>In fact, the bond market seems to do everything possible to keep the small investor out.<\/p>\n<p>The walls, buying restrictions and ridiculous pricing structure of bonds are set up to keep the little guy out of individual bonds and in bond funds. Bond funds that have all kinds of flaws, such as hedging and very long average maturities, the implications of which most investors don\u2019t fully understand.<\/p>\n<p>But investing in bonds can have some real advantages. They\u2019re custom made for investors who:<\/p>\n<ul>\n<li>Want returns above what savings or CDs are paying.<\/li>\n<li>Are tired of the wild fluctuations of the stock market.<\/li>\n<li>Can\u2019t afford any more of the losses they have incurred in the past 10 or 12 years.<\/li>\n<li>Need more reliability and predictability in their investments.<\/li>\n<\/ul>\n<p>But plenty of problems stand in the way of the novice investor who\u2019s simply trying to buy a bond:<\/p>\n<h2><strong>Lack of Exposure<\/strong><\/h2>\n<p>Unlike most investments, there are no 24-hour television networks that have a constant flow of bond ideas. And most bond information that does exist consists of the 10-year Treasury, overnight rates and confusing quotes about rising and falling rates, treasury auctions and prices.<\/p>\n<p>Frankly, the information available from all sources \u2013 <em>The<\/em> <em>Wall Street Journal<\/em> and <em>Barron\u2019s<\/em> included \u2013 is useless! I don\u2019t think I have ever seen a news story about an upcoming corporate bond offering, and if there was one, the offering was sold exclusively to institutions.<\/p>\n<h2><strong>Lack of Information<\/strong><\/h2>\n<p>Second, just getting to a page on an online broker\u2019s site to buy a bond is ridiculously difficult.<\/p>\n<p>Go to any broker\u2019s website and click on \u201cTrade Bonds\u201d and you\u2019ll get something that looks like this.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-27089\" title=\"This is a typical bond investing chart on a brokerage website.\" src=\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/02\/investing-in-bonds.jpg\" alt=\"Investing in Bonds\" width=\"587\" height=\"298\" \/><\/p>\n<p>What you\u2019re supposed to do with this chart is beyond me.<\/p>\n<p>To get to any sort of usable information or the next page (which is never clearly marked), you must fill in as much information as the U.S. government wants from folks joining the military.<\/p>\n<p>Here\u2019s a partial list of the information that\u2019s needed:<\/p>\n<ul>\n<li>Cusip<\/li>\n<li>Frequency<\/li>\n<li>Maturity<\/li>\n<li>Coupon<\/li>\n<li>Yield<\/li>\n<li>Price<\/li>\n<li>Quantity<\/li>\n<li>Current Yield<\/li>\n<li>Bond<\/li>\n<li>Bill<\/li>\n<li>Notes<\/li>\n<li>Zero Coupon<\/li>\n<li>Indexed<\/li>\n<\/ul>\n<p>If the average guy knew all this, he wouldn\u2019t need a broker at all.<\/p>\n<p>Even if you can come up with all the information necessary to find some bond possibilities, you usually end up with a list of thousands of bonds and no information about any of them other than their cusips and descriptions.<\/p>\n<h2><strong>Lack of Access<\/strong><\/h2>\n<p>Can you imagine having this much trouble trying to find a stock to buy? It\u2019s absurd \u2013 but absurd by design \u2013 designed by the market to be virtually impossible.<\/p>\n<p>You see, the bond market doesn\u2019t want the small guy. They only want the big money, and they price their bonds accordingly.<\/p>\n<p>If you buy 10, better yet 20 bonds or more, you have your pick of any type of bond and at the best price. But how many people have $20,000 to invest in each trade? Very few.<\/p>\n<p>Try to buy five bonds or just one, and the most likely answer you\u2019ll get from a bond desk is: \u201cWe can\u2019t sell one bond,\u201d or \u201cIt isn\u2019t worth it to you to buy so few.\u201d<\/p>\n<p>Baloney! What they really mean is they don\u2019t make enough money on a trade that small to make it worthwhile to them.<\/p>\n<p>Plus, the small guy is annoying to the gods of the bond desks. The bond gods don\u2019t like the little guy. They do annoying things like ask questions and expect the people on the bond desk to speak English, not the tree-fort, insider-only lingo they have concocted.<\/p>\n<h2><strong>Better Returns Without Leveraging<\/strong><\/h2>\n<p>The fact is you <em>can<\/em> buy one bond.<\/p>\n<p>Yes, it will cost a little more and you will get a little less if you sell it before maturity. But most stockbrokers know so little about bonds, they don\u2019t know this, either.<\/p>\n<p>And fortunately, the increase in buying price isn\u2019t so great that it makes a significant difference to the average guy. A bond desk will make the increased cost for small bond orders sound like the end of the world, but do the math and it isn\u2019t that bad.<\/p>\n<p>When you buy individual bonds instead of bond funds you can get better returns without any leveraging. Leveraging is one of the biggest unknowns to bond funds investors and it will come back to haunt them.<\/p>\n<p>Buying individual bonds also allows you to buy many small positions in many different industries. This has the same effect as diversifying in your stock portfolio.<\/p>\n<p>As you diversify, you also have the opportunity to spread your maturities over a much shorter range, preferably less than a seven-year average. The best part is you have control of the maturities you hold and you aren\u2019t bound by a bond fund\u2019s prospectus \u2013 which can cost you a lot of money when rates run up.<\/p>\n<p>Buying many small, ultra-short bond positions in this market is the only way you won\u2019t get crushed when rates turn back up. Even though we don\u2019t expect any real uptick in rates for about three more years, you can\u2019t risk holding long maturities (in excess of a seven-year maturity). It isn\u2019t prudent!<\/p>\n<p><em><a rel=\"nofollow\" target=\"_blank\" href=\"http:\/\/oxfordclub.com\/video\/oxf\/OCSP0212.php?code=WOXFN501&amp;n=CommMP\">The Oxford Club<\/a><\/em> is a good place to begin to learn about the benefits of individual bonds. They have a list of brokers called the Pillar One Partners. Many of these brokers will buy as few as one bond and all of them have met our standard of excellence and have been a part of the <em>Club<\/em> for many years.<\/p>\n<p>Bond investing can be the answer to almost all of the needs of the average person, it may take a little effort to get to the same level of comfort you feel with stocks, but it will be worth it.<\/p>\n<p>Good Investing,<\/p>\n<p>Steve McDonald<\/p>\n<p><strong>P.S. <\/strong>As I\u2019m sure you\u2019ve seen by now, we\u2019ve created a new research service that aims to produce double-digit returns without touching any stocks or options. But we\u2019ve signed up so many <em>Investment U<\/em> readers already that we have to cut off enrollment for the service at midnight tonight.<\/p>\n<p>Unlike stocks, these investments tend to have a very limited inventory. So if you\u2019re interested in learning more about my new service and how I\u2019m doing it, <a rel=\"nofollow\" target=\"_blank\" href=\"http:\/\/oxfordclub.com\/pro\/OXFp0512redcent.php?code=WNMTN605&amp;n=NMT895\">click here<\/a> before it\u2019s too late.<\/p>\n<div>\n<a rel=\"nofollow\" target=\"_blank\" href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Upmtq65L1DU:kQIqZIEPsqU:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=yIl2AUoC8zA\" border=\"0\" \/><\/a> <a rel=\"nofollow\" target=\"_blank\" href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Upmtq65L1DU:kQIqZIEPsqU:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=Upmtq65L1DU:kQIqZIEPsqU:V_sGLiPBpWU\" border=\"0\" \/><\/a> <a rel=\"nofollow\" target=\"_blank\" href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Upmtq65L1DU:kQIqZIEPsqU:qj6IDK7rITs\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=qj6IDK7rITs\" border=\"0\" \/><\/a> <a rel=\"nofollow\" target=\"_blank\" href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Upmtq65L1DU:kQIqZIEPsqU:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=Upmtq65L1DU:kQIqZIEPsqU:gIN9vFwOqvQ\" border=\"0\" \/><\/a> <a rel=\"nofollow\" target=\"_blank\" href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=Upmtq65L1DU:kQIqZIEPsqU:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=Upmtq65L1DU:kQIqZIEPsqU:F7zBnMyn0Lo\" border=\"0\" \/><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/InvestmentU\/~4\/Upmtq65L1DU\" height=\"1\" width=\"1\" \/><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/SyndicationFeed\/~4\/JGoKgxfbakQ\" height=\"1\" width=\"1\" \/><\/p>\n<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Article by Investment U Buying many small, ultra-short bond positions in this market is the only way you won\u2019t get crushed when rates turn back up. Avoid long-term bonds and bond funds. Bonds are the answer to most investors\u2019 needs, not their get-rich-quick dreams, but their real needs. So, you\u2019d think the bond market would &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/forex-news\/2012\/06\/27\/unlocking-the-mysteries-of-bond-investing\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Unlocking the Mysteries of Bond Investing&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-30501","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/30501","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=30501"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/30501\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=30501"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=30501"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=30501"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}