2022 has seen one of the worst bond crash ever, and it’s interesting that when this happens to equity people say you should buy it because it’s a bargain, but you never hear that about bonds. In this video, I take a look at what’s been happening to government bonds, I also discuss whether now is a good time to buy bonds or not and then finish off by showing you what I’m doing in my own “fun” portfolio.
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Timestamps
00:00 Introduction
00:29 Reasons
01:29 Bond Losses
07:27 Recession
09:39 Higher Yield Now
11:30 Sticky Inflation
13:25 Growth Suprise
15:20 What I’m Doing
16:47 Conclusion
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Why I’m Buying Bonds
In today’s volatile and uncertain economic landscape, it is crucial to look for stable and reliable investment opportunities. One such avenue that I am exploring is the purchase of bonds.
As an investor, I value security and predictability in my portfolio. Bonds provide just that. Unlike stocks, which are subject to market fluctuations and can be highly volatile, bonds offer a more stable and predictable return on investment. This is particularly important during times of economic uncertainty, such as the current global pandemic, where stock markets have experienced significant drops and unpredictable swings.
Moreover, bonds offer a fixed interest rate, providing a regular income stream for the duration of the bond’s lifespan. This steady income can be especially appealing for investors who rely on a consistent cash flow or those nearing retirement who are seeking more conservative investment options.
Another advantage of investing in bonds is their relative safety compared to stocks. While there is always some level of risk involved in any investment, bonds are generally considered less risky than stocks. Bonds represent indebtedness by a corporation or government entity, and the issuer is legally obligated to make regular interest payments to bondholders. This adds an extra layer of security to the investment, especially when investing in high-quality bonds with a reputable issuer.
Additionally, bonds are an excellent diversification tool. By adding bonds to my portfolio, I am diversifying my investments across different asset classes, reducing overall risk. Bonds tend to have a negative correlation with stocks, meaning that when stock prices drop, bond prices tend to rise. This inverse relationship helps to stabilize a portfolio and minimize losses during market downturns.
Finally, bonds provide a reasonable return on investment, despite their lower potential for substantial gains compared to stocks. While bonds may not offer the same opportunity for exponential growth, they can still provide a satisfactory and consistent return over the long term. This steady and predictable income is highly attractive to risk-averse investors like myself, who prioritize stability and preservation of capital.
Of course, it is essential to conduct thorough research and carefully analyze the bond market before making any investment decisions. Factors such as credit quality, maturity date, and prevailing interest rates all need to be taken into account.
In conclusion, given the volatile nature of today’s economic climate, I am opting to include bonds as part of my investment strategy. The security, predictability, steady income, diversification benefits, and reasonable returns make bonds an attractive option for risk-averse investors seeking stability and long-term growth.
It would be interesting to see how these bond buying recommendations have fared over the last year – not too well I suspect.
Hi Ramin – I have been following this channel with interest. but there are some things about bonds I do not understand, Why buy government bonds when you can get a short term interest rate 4% from your average building society at the minute- no risk, And what about corporate bonds, wouldn't they have a greater yields? (albeit with slightly more risk?).
Thanks for a great video!
Question: Why do people or institutions invest in long government bonds in times when the yield is very low? Which means that the price of the bond is very high. And if the interest rate rises, the price of the bond falls. It's more likely that the yield/interest rate will increase over time and lower the bond's value. So, what is the incentive to invest in times like this? For example, if banks invest in long term government bonds with low yield that will lead to a mismatch in duration between borrowing and lending.
And How can banks hedge against higher interest rates without selling their long-term government bonds and make a loss? We have seen recent example of this regarding SVB, Silicon Valley Bank and Signature bank.
If inflation is being driven my a lack of commodities and the same level of demand, would that mean that it is worse for the economy, to keep rates high, because the money that should be going to commodity mining is going into bonds instead?
Why not just buy individual bonds ??
Thanks for the video. I'd be curious to hear a 6 month update (or maybe you've made one but I couldnt' find it?). Did you keep your bonds? TLT seems to bottomed in November and would have been another whopping 20% drop…almost 30% for 2022!
Why don't any mainstream Bond investors talked about buying high grade corporate bonds
Thank you! Very interesting. Be sure to try the methods.
I think inflation is going to remain 'sticky' because of oil and gas prices going forward. Of course, this is primarily due to the Ukraine war, which even if it ended tomorrow, the USA in particular, would want to restrict Russia's oil and gas sales to Europe in the years ahead. Also, with China's recent relaxation of Covid lock-downs that will undoubtably increase manufacturing activity, thus maintaining a higher pressure on oil and gas prices. Also, America's economy hasn't yet begun to slowdown and so that too will also keep oil and gas prices high in the short to medium term. Add to that the next three months of winter weather, that too will keep oil and gas prices high. For sure Bonds is certainly looking like an attractive proposition and I would look to commence buying increasing positions commencing at some point during 2023. Thank you Ramin for the 'heads-up' on Bonds and for explaining the opportunity so clearly.
If ever you can update with bond etf like tip and jnk
uk has long had d same prostitute houses in soho. they dont move. corruption must b high 4 this 2 happen.
joly ol england is more corrupt then u think. how will they change the world without changing self. its appaling.
boycott the uk until they set d example.
boycott uk
Just buy 6month treasuries. Price risk doesn’t exist as you can hold till maturity. This is better then treasury funds
All I know is index Bond's go up when the 10 Treasury Note goes down.
Good work. Thank you
What about corporate bonds? Is it time to buy them too? Or they are gonna be falling because of the recession increase the probability of default?
Is SPHY a good bond to buy?
Has anyone tried recreating the chart in 14:52? I get slightly different version, can't figure out why?
Great video as usual. Are you still thinking the same way after Liz Truss and Kamikwasi have completely decimated the UK economy?
In your opinion, will treasury bond a good short term investment for 6 months?what is your opinion on Ibond?
This was a great video.
Housing rent prices have a big time lag in the CPI calculation. A big reason inflation is still high. Housing rent is a much much bigger component than fuel/energy.
Oops
Come in to see if this guy will survive the inflation linked bonds crisis…
Quantitative easing was a quasi get rich scheme invented to make the rich richer and keep the poor poor. Hundreds of billions given to the banks that they divvied out amongst the rich. Trillions put on the debt that our children will have to bare and not a penny paid off by this generation. They got away with it because it (temporarily pushed up house prices) but they knew when the gravy train dried up it would all come crashing down. Now is that time. We need criminal investigations into these people and a proper look at what they knew about their quasi get rich scheme. I bet they are busy losing emails and hard drives as we speak
We are on the verge of topping r
the inflation percentage of 78-81
Listened to this great video again. Decided to buy a one month T Bill directly. The payout is reasonable and I can repeat for as long as the rate stays decent.
Now what do I buy?
Arculus ad is a joke. Crypto is a fraud. The cult will have to learn the hard way. Bit coin to zero.
This video did not age well
Just buy the bond instead of this etf and hold it to maturity.
What's your view on TIPS?
So no lambos then?
Excellent
Great video. I’m waiting to see if new reserve currency from BRICS countries causes depression & hyperinflation in US.
I think VUTY still has some legs given the outlook and the dollar strength on income is good! Why only suggest using a tiny bit of capital? Bonds should make up a good part of a balanced portfolio.
I put 20% of my pension into bond ETFs before the US CPI data release. They went up 1% whilst the S&P dropped 5%.
Also, got in just before distribution date.
Glad I watched this video.
China's economy is much worse than people are reporting. Foreign bond holders will get burned.
Unemployment is rising. 16 -24 year old unemployment is 20%
Unemployed people are not huge consumers. They do not buy homes. They do not get married or have children.
Individuals, foreign corporations and investors are fleeing cities and the country.
Numbers reported by the government can not be trusted.
Steel production collapse is a good example of the huge decline in the economy.
The property developers collapse is starting to ripple thru all its suppliers. Steel is the most visible. More to come.
The house of cards built on debt is not sustainable. The Ponzi scheme has been exposed.