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Our Rich Journey – How to Invest In Bonds | OUR TOP PICKS & Our Strategy for Investing for Financial Independence: Bonds, Bonds, Bonds!!! One of the most important decisions an investor can make is how to allocate his/her investment portfolio. Specifically, as an investor, you must decide whether you want to invest 100% in stocks, 100% in bonds, 50% stocks and 50% bonds, or any other combination of stocks and bonds. But, in order to make that decision, you need to be fully informed about how bonds work and how they can impact your portfolio. That’s why we made this video! In this video, we discuss what bonds are, the different types of bonds, how you can invest in bonds, the pros and cons of investing in bonds, and we identify specific bond investments with the top discount brokers online. AND we also share our opinion on bonds and whether we used bonds to create our financial independence, retire early (FIRE) portfolio. Thanks for watching!
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How to Invest In Bonds: Our Top Picks & Our Strategy for Investing for Financial Independence
One of the key aspects of achieving financial independence is investing wisely. While there are numerous investment options available in the market, one that often stands out is bonds. Bonds are a great addition to a diversified investment portfolio as they offer stable returns and can provide a steady income stream. In this article, we will discuss how to invest in bonds, our top picks, and our strategy for investing for financial independence.
1. Understand What Bonds Are:
A bond is essentially a loan given by an investor to a government or corporation. In return for lending money, the issuer promises to pay interest at regular intervals and repay the principal amount at maturity. Bonds come in different forms such as government bonds, corporate bonds, municipal bonds, and treasury bonds. Understanding the basics of bonds is crucial before investing.
2. Evaluate Your Investment Goals:
Before investing in bonds, it is important to evaluate your investment goals. Are you investing for a short-term or a long-term period? How much risk are you willing to take? Bonds have varying maturity periods and risk levels, so assess your investment objectives before making any decisions.
3. Research Different Types of Bonds:
To make informed investment choices, it is essential to research different types of bonds. Government bonds, for example, are considered low-risk investments as they are backed by the government. On the other hand, corporate bonds may have higher yields but come with more risk. Understanding the risks and rewards associated with different bonds will help you make the right investment choices.
4. Consider Bond Ratings:
Bond ratings are provided by credit rating agencies and indicate the risk associated with a particular bond. These ratings include AAA, AA, A, BBB, and so on. Higher-rated bonds are generally considered safer investments, while lower ratings indicate higher risk. When investing in bonds, it is advisable to choose well-rated options to reduce the risk.
5. Diversify Your Bond Portfolio:
As with any investment strategy, diversification is key. Allocating funds to different types of bonds reduces overall risk and can potentially enhance returns. Diversification can be achieved by investing in bonds with varying maturity dates, issuers, and sectors.
6. Consider Bond Funds:
If you are looking for a hassle-free way to invest in bonds, bond funds are a viable option. Bond funds pool money from different investors and invest in a diversified portfolio of bonds. This provides small investors with exposure to a variety of bonds without the need for significant capital. Bond funds are managed by professionals who strive to maximize returns and manage risks.
7. Seek Professional Advice:
If you are new to bond investing or uncertain about which bonds to invest in, seeking professional advice is advisable. A financial advisor or investment professional can help assess your financial situation, discuss your goals, and recommend suitable bonds to invest in.
In conclusion, investing in bonds is a viable strategy for achieving financial independence. By understanding the basics, conducting thorough research, and diversifying your portfolio, you can make informed decisions that align with your investment goals. Remember, financial independence is a long-term goal, and investing wisely is a crucial step towards achieving it.
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The best!
What about ETFs, they seem to be a more simple investment.
I wanna just say this about bonds – I invest in mutual funds in my seventh world country because that's the best option, we have no etfs or index funds here, and, every quarter of the year I transfer 0.75% from the stocks into the bonds. Why? Right now I don't need the money from my investments, but I wanna be sure I have a pot that is stable to pull money from. That's the role of bonds in my portfolio. And yes, i transfer 0.75% quarterly to add up to 3% annually since the mutual funds charge me around 2% in fees. Their 2% and my 3% for me it's the 5% rule. I am using it ahead of time as if I am retired right now, to avoid volatility in case I need big chunk of my money. And I still invest every month into the stock funds.Great explanation why you don't hold bonds, makes sense.
We invest 1/3 of our main IRA in cash & bonds. The remaining 2/3 is in stocks and index etf’s. All of our investments drive toward income and then growth (dividends). We are retired so this fits us at this point in our lives
Im new to this and have a quesiton about the VTBLX. Im seeing that in 2014 the cost was around 10.50 and since then has dropped to around 9.70 given the which I attribute to the -9.7% drop last year. If someone invested in 2014, would these mean they would have lost money on this index fund?
THis is great stuff. Secondary bonds are far less desirable.
Can you buy from yourself?
I don’t invest in corporate bonds, because they usually don’t pay enough and they’re more risky. The mutual funds and ETFs don’t pay enough interest. Your video was made two years ago and the rates may have gone up since then. Due to the squirreliness of the stock market, instead of keeping my money in an online savings account, I am parking money in T-bills, with a ladder of 17 week T-bills, which are currently paying 4.7%. One advantage of T-bills, is you don’t pay state or local tax on them, if your state and city taxes your income.
Another area I’m starting to invest in again, is municipal bonds, because they’re paying over 4% again. Municipals are federal, state, and local tax free.
Food for thought: I heard that BBB municipal bonds are safer than A-rated corporate bonds.
Can you please make updated video about Ibond
Your passive income stream is classified as interest which is low tax income 100%
Bond fund also has price risk – which is not the case in holding individual high quality bonds. You get x% coupon, but also loose x% in price of bond fund. You cannot really hold a bond fund to maturity! What is your thought about it?
Are you all going to do an update to this video. ? Look forward to it. The bond ETFs have reset. So we should see crazy returns in the next couple of years
awesome information… Thanks….
Good info for retails. Makes perfect sense for people been around for less than 10 yrs or so.
According to Warren Buffet , 10 % should be in short term government bonds. Therefore, I will buy this in my retirement account. BND(ETF) pays a div of .15 each month.
I purchased your course and have a few questions how can I get in contact with you guys?
I have senior loan funds as well. The yields are higher.
Great video – thank you!
Omg!!! This information is like liquid gold. Thank you both
My parents could barely eat at my age. No one is teaching me about bonds or even life, but myself. I don't have 3k to spare for bonds.