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Financial Education 101:
What goes up almost always comes back down…
Contrary to what most individual investors think, bonds are not always safe. Here’s why:
Bonds are usually purchased for the interest that they pay you while you own them. And as you know, interest rates have been super low for a really long time.
Most bonds pay a fixed rate of interest based on market rates at the time the bond is created. When interest rates increase, investors are no longer happy to buy bonds that pay those older, lower interest rates….so, the value of the bond naturally goes down.
It’s one of the most important financial education tips to remember.
Here is a great article that explains this important investment concept really well from Forbes Contributor and Money Expert Mike Patton.…
When panic struck in 2008 investors sold stocks and rushed into bonds with great exuberance. Over the past five years this extreme cash influx has pushed bond prices higher and yields lower. However, when investors began to sell stocks recently, if the proceeds would have flowed into bonds, then one might have expected bond prices would have risen and yields would have fallen…Read the full article here…