Bond Investing 101--A Beginner's Guide to Bonds
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- Опубліковано 17 лип 2021
- Bond Investing 101--A Beginner's Guide to Bonds
Most investors include bond ETFs or mutual funds in their portfolio. Yet do we really understand how bonds work. For example, when interest rates go up, the value of existing bonds go down. Why? And are all bonds more or less the same?
These are important questions for investors, particularly those near or in retirement. For retirees, like myself, we tend to invest more of our portfolio in bonds and fixed income. We better know what we are doing.
In this video, I'll cover everything you need to know to invest in bonds and bond funds with confidence.
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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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I was advised to diversify my portfolio among several assets such as stocks and bonds since this can protect my inherited portfolio of about $2.5m. I’m used to just buying and holding assets which doesn’t seem applicable to the current rollercoaster market plus inflation is catching up with my portfolio. I’m really worried about survival after retirement.
True, I mostly just buy and hold stocks, but my portfolio has been mostly in the red for quite awhile now. Unfortunately to be able to make good gains, you’ll need to be consistent and restructure your portfolio frequently.
In my opinion, it was much easier investing back in the 60s but it’s a lot trickier now, those making consistent profit in these times are professionals reason I’ve been using an advisor for the past 5 years to consistently build my portfolio in preparations for retirement.
My partner’s been considering going the same route, could you share more info please on the advisor that guides you?
Sonya Lee Mitchell maintains an online presence that can be easily found through a simple search of her name on the internet.
I googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
I have been retired for 6 years. I have a 130K annuity, plus a 401k depleted to $150,000 of money that I’m considering allocating in a 60/40 stocks and bond ratio. i'm hoping this is a valid thought process?
Not a great April so farr, but if you step back and actually look you will see the S&P 500 was up for the first Quarter. In the last 30 days, my IRA saw a gain of $40k. You might consider financial advisory if you're experiencing significant drop.
The market's instability makes DIY risky. You don't need to find the next NVDA to succeed in investing. Opt for top-notch ETFs, dividend aristocrats, and a trusted advisor. I've turned $100k into $20k in annual dividends, a major milestone.
I've been considering getting one, but haven't been proactive about it. Can you recommend your advisor? I could really use some assistance.
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Jennifer Leigh Hickman” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
Thank you for sharing, I must say, Jennifer appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive. I reached out and scheduled a call
I learned more from this 45-minute video than an entire semester of Finance. It was concise but detailed.
Rob - The way you organize your thoughts is absolutely FABULOUS. I’ve never really understood bonds so I’ve avoided them. Until now! In 45 minutes, you cleared up my confusion and I now have the confidence to consider including them in my asset allocation. I’m within 7 or 8 yrs of retirement so it’s high time. Thank you!
Rob. Thanks for this video. A very clear explaination. It's an area of my portfolio that I didn't quite grasp..until now. I really enjoy your channel --you make things much easier to grasp
Amazing value. Lengthy yet sufficient and not overwhelming!
Thank you very much for the comprehensive coverage.
This is all the information I wanted and couldn't find, thank you!
Great explanation for a newbie like me. Thank you so much!
2 years after the video was aired Rob Bergers strategy to invest half in traditional bonds and half in TIPS (following David Swansons approach) was very good. Despite their negative yield at the time. As he said "just in case inflation rises"...
Same with his attitude towards the hyped ARK Funds: just before their total decline he explained why he would never invest into them.
Thanks for taking the time to do this!
Besides everything else especially appreciate your bond duration explanation and the applucable discounts. This is really very helpful. Thanks!
Very down-to-earth and simple explanations, I appreciated it a lot thanks . I would have loved a short guide to buy individual corporate bonds though
Thank you Rob for an excellent explanation of bond and bond fund structure.
Fantastic! Just the subject I need to know more about. Thanks.
This really helped me understanding the overall bond economy , thank you
Hi Rob, thank you for what you do. The way you explained the concepts was easy to follow for beginners. I wish I had someone like you teaching me in school. You would be a great professor.
This was super helpful. Simple to understand - thanks a ton.
@Rob Bergr: you worked on weekend for us. thank you so much for addressing this topic! I have learned a lot!
@Rob Berger, Does rising Interest rate affect VNQ Reits etf? thanks
Damn, this timely video is just what the doctor ordered. Always struggled to understand bond pricing, thanks for making it simple
Thanks for the info. I have in the past stayed away from bond funds because of low yields and lack of good understanding how they work. As I enter retirement I am rebalancing my portfolio and may use bonds in place of some CD's which pay even less. Been enjoying your content.
Rob, thank you very much for this information. Like others have said, you articulate the key concepts so well. Very useful 👍
Bonds can really get your head spinnen! Nice job, I learned a lot!
Thank you so much for this. This was super helpful and very educational. I learned so much and the way you explain was very clear and easy to understand!
This is the best introduction video on bond investing I've come across in a long time. Instant subscribe! Please never stop educating the world with your knowledge and the fascinating delivery of that knowledge.
A large portion of my Macroeconomics class summed up in 45 minutes!
That was extremely helpful. Thank you
Wow this is so good and a lot to digest. It's late so I'm going to have to come back to this so I can absorb everything. Thank you so much for this!
I've been searching for a while for an explanation of bonds with this level of depth and clarity, and I'm delighted that I kept looking! This is precisely the introduction that I needed, explaining the terminology and investing strategies in a straightforward way. Thanks so much for your work!
I’m a new investor and spent probably several days of research getting a grip of the fundamentals of bonds and bond funds. Had a just watched this video I would have been set. Clear and concise. I would LOVE for you to do a future video in the same fashion explaining TIPS and TIPS funds. Still trying to get a grasp on the fundamental and utility of that investment option.
Hi Rob - thanks for this wonderful video. Super clear
Brilliant work. Thank you very much.
Such a talented instructor!
This was great. Exactly what I needed.
Awesome intro to bond structure and investing!!
Great work, Bob. Very helpful. Thanks.
Thank you. I felt like a friend was talking to me in your presentation. Thank you
Super helpful! Thanks Rob!
You are a lifesaver. Thank you.
Amazing video to learn about , very informative & real life examples.
As somewhat of a novice, found his explanations clear and easy to follow.
very impresive, thank you.
Thanks Rob, I'm taking notes .
It’s still better than a savings account, regardless.
Good point.
This didn’t age well
Rob, thank you for making this video! I understand the relationship between interest rates and individual bond prices, but I’ve always wondered how it affected a bond ETF or mutual fund. I’ve never heard anyone else address this topic before. Your explanation makes me a bit more comfortable keeping some bonds in my portfolio going forward with the risk of rising rates. They are kind of like dividend stocks in that even if their price goes down, their yield goes up! I look at it as a win win either way with both. On a side note, I love your laid back, calm presentation style, and lack of click bait titles👍
The collapse of Margin debt leads to a decrease in stock prices and triggers a wave of selling as investors try to cover their losses, Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. Hence what are the best stocks to buy now or put on a watchlist? I’ve been trying to grow my portfolio of $145K for some time now, but my major challenge is not knowing the best entry and exit strategies. I would greatly appreciate any suggestions
I'll suggest you find a mentor or someone with experience to guide you, especially in this recession. especially for your 401K, IRA and portfolio diversification.
I agree, I thought I was doing alright profit-wise, until I needed assistance with diversification, I reached out to a financial advisor and in less than a year I was just $51,000 shy away from $640k which is like 7x more than I make on my own..
I've been thinking of going that route has been holding on to a bunch of stocks that keep tanking and I don't know if to keep holding or just dump them, think your Inv-coach could guide me with portfolio restructuring.
I've shuffled through a few advisors in the past, and *MARTHA ALONSO HARA* remains the most resourceful thus far. Her strategy proves profitable, and sustainable both in a bull & bear market. Most likely, her details can be found on the net, so you can confirm yourself.
I just looked her up on the internet and looked into her credentials. I wrote her a mail outlining my financial objectives and planned a call with her.
Thank you Rob for explaining bonds investments in clear and simple terms. I was trying to understand for long why bond ETFs (VGLT, BND) are paying so low compared to S&P 500 (VOO) in last 5 and 10 years. And was avoiding investing in bonds due to it.
I am planning to invest in I- bonds and BND for my 20% allocation in bonds.
Excellent video. Thank you !
I have recently discovered your channel, very good content and education. Thank you
Very well done Video. Thank you.
Please do an update for 2023, when rates have gone up the way they have. Not a new video maybe, but something to add onto this one.
Maybe during that video, you could also contrast how bonds look to the investor in the period of time in this video, versus current. And maybe you could say, the best time to buy Xtype of bond would have been DATE, and this other type of bond DATE, because, but the worst time would have been DATE because.
And maybe you could talk about the new SGOV etf and compare it.
Thank you for sharing your knowledge, Rob. What do you think about combination of BND and VGIT as one of the approaches?
Enjoy watching all your videos
Wow - thanks for the thorough explanation and your taking the time to educate your viewers. Respect. I learned something very useful other than the basics - to not be too alarmed about short term changes in the interst rates/bond prices and if you're a longterm investor in BOND mutual funds/etfs you can be assured that fund will correct over time in response to the market. Crazy that you only have 20-30k subs for so much great information/education.
IF YOU DONT HAVE GRAY HAIR MAYBE CONSIDER NOT INVESTING IN BONDS AT ALL ????
I have been trying to understand this for over a month now- yield, bond fund prices, interest rates, etc. An explanation that could make sense to me was not to be found in all the content I’ve consumed in the past 4-5 weeks: audiobooks, podcasts, blogs, Reddit…
I just finished watching this and I FINALLY “get” bonds/bond funds. And it’s literally only because of your video. Your explanation of why purchasing your own bonds may not be practical was the missing piece to tie it all together. I just could not understand why anyone would buy into a bond fund instead of purchasing their own at a rate they found agreeable. I felt like I was missing an important piece of the puzzle (and I definitely was!). Thanks so much for taking the time to share your explanation- it was the version that finally made it click. :)
Great video. Learned a lot
Thank you Rob. I didn’t know anything about bond investing. I may have to watch this video again to understand it even though it is beginners guide. One question I have is what would be the approach if I want to include municipal bonds in the mix?
Thank you so much.
thanks rob!
Excellent educative video, thx!
I buy individual bonds, and don't find it a problem to keep records. I like 'em because I know exactly what my return is. Occasionally I sell one but then I have to figure capital gain/loss, which is a pain. My bond portfolio is about 600K, half in IRA. I just want people to know it's doable (and fun to pick out bonds). During Covid, airline bonds were an amazing deal. Should sell them now, maybe I will....
This an excellent explanation of one of the most distasteful subjects: bonds. Most investors buy bonds to counter balance the rise and falls of stocks. But so many times they don't inversely correlate. I know bonds correlate to interest rates but still...these buggers are just frustrating. Bond price goes up and yields go down...this is so confusing for the laymen...
I've been investing in bond funds for more than 30 years and I feel like I understand them for the first time! Thank you so much! You are a fantastic teacher!
Excellent presentation!
Great stuff starting at 16:31
Very good video it was just what I needed to venture into bonds
Very interesting. Well done. Thanks.😮
Very helpful. Thanks
I’m a tax accountant and often work with original issue discounts and bond premiums (and their amortization) on tax returns. You explained this so well for everyone to understand. 😊. Thank you!
Thank you for explaining things so clearly for a relative newby in this arena
many thanks great video
Great explanation, Thanks
Excellent job!
I am aware that continuing to invest during periods of volatility can be a smart way to build wealth. I’ve heard testimonies of people accruing over $250k in this red period. What measures can I take to achieve this?
It's a delicate season now, so you can do little or nothing on your own. Hence I will suggest you get yourself a professional that can provide you with entry and exit points on the securities you focus on.
@@MarthaDavis-fh6cw I'm sure the idea of a coach might sound generic or controversial to a few, but new study by investopedia found that demand for portfolio-coaches sky-rocketed by over 41.8% since the pandemic and based on firsthand encounter, I can say for certain their skillsets are topnotch, I've raised over $400k from an initially stagnant reserve of $150K all within 14months
@@jetkastrokdova Thats true, I've been getting assisted by a FA for almost a year now, I started out with less than $200K and I'm just $19,000 short of half a million in profit.
@@margaritasbunny I'm looking for recommendations for a reliable investment advisor who can help me develop a long-term strategy for investing approximately £5 million. Ideally, I'm hoping to achieve a 5% dividend with compounding, which would be around £250k per year.
@@jirinamuzikova
Really Well Done
You are very good explaining the bond concepts. I understand bond is a long term investment with lower liquidity; however, I wish you can explain steps to sell bonds especially I bond. Thanks so much.
Thank you for the information! I noticed that the examples had a very low weight on Muni bonds? Is there a reason for that and do you have an opinion of adding a Muni Bond fund in addition to the total bond (say 60/40)?
😊Clearly explained.
Fantastic video...thank you for posting. How do you feel about stable value funds vs bond funds? I have most of my money in a 401k and there is a stable value fund (12.5 bps) and a total US bond fund (2.8bps). Both are quite cheap but there is not much data on the stable value fund although from what little I can see they seem to be even more attractive than bonds especially with bond yields being so low.
I am a new subscriber to your chanel, you are simply AMAZING sir, thanks
Excellent overview, even for a neophyte like me. One addition, I would suggest looking into BNDW, which is Vanguard's world bond fund - currently ~50/50 BND / BNDX (so 50/50 US and international bonds). Up to you, and your hedging needs.
Great stuff
Thanks, Rob. The bond portion of the portfolio has been pretty much ignored because I was never really quite sure… I was looking at TIPs, and the rates are up with the inflation uptick, but when you spoke about the BND option, and then the 50/50 TIPs/Govt split consideration, was the split in addition to, or as a replacement the general bond fund? I’m guessing it is an add on to provide some short term diversity and inflation protection. Given the govt portion of BND (while intermediate), does it make sense to split BND and TIPS?
Thanks Rob. Really helpful. The only thing I don’t think you touched on was selling out of your bond fund. If you wait until maturity on a treasury bond, you get your principle back, weather or not rates have gone up or down. What happens in a bond fund as there is no maturity date? If in 5 or 10 years you want to sell but the fund has lost value, isn’t that a risk compared to holding a 5 year or 10 year treasury to maturity? Thanks!
What is the difference between the 12 month yield (or TTM) and SEC yield? I understand the TTM is the dividend (or distribution) annualized, but where does the SEC yield come from and how is it useful?
I appreciate all the info from your videos I have gain lots of knowledge
Good tutorial
Thank you
Man this video aged well! Rob called the inflated bond prices coming down to a T.
This is a great lecture! Given the terrible yield, what's your opinion view of {stock + cash} portfolio?
Thank you for all of the great info here Rob. I thought you said you were going to talk about how bond ETF's and mutual funds differ. It sounded like you were eluding to ETF's having some advantage, but I don't remember you covering that further. Did I miss something here?
I talked about how individual bonds different from ETFs and mutual funds. I don't see a big difference between ETFs and mutual fund, at least for long-term investors. There are differences, of course, but not so much in terms of how the bond investing works (unless you go with something like Bulletshares).
This is a great video! Well done! I do have a question. When you buy a bond fund (let's say Vanguard's BND), do you make money simply from the appreciation of the NAV or do you also get money from the coupon payments? Thanks for this good info!
Thank you for this video. I still don't feel "great" about bonds. The less I have to tinker with my investments, the better.
Rob, I’d enjoy if you used this as a portfolio analysis or maybe did an episode. Compare the following portfolios on Portfolio Visualizer, rebalancing annually or quarterly: 70% VTSMX, 30% VFISX; 70% VTSMX, 30% VFITX; 70% VTSMX, 30% VUSTX. Performance of longer term bonds are better with the same STDEV. Then run the bonds on their own, vastly different. Can you weigh in? I’d enjoy reading the comments as well.
Great video!! I think there's one small issue at 3:22, when you talk about a $10K bond with 2% interest ($20). The video says, "Whatever the interest is, you're going to get that every 6 months." I interpret that to mean you'll receive $20 every 6 months, but I think you meant $20 per year split into 2 installments. Otherwise the bond would pay $40/year or a 4% coupon. Anyway, loved the video -- super informative.
Great video and explanations Rob. I am a new fan. However, factor in inflation and bonds are just plain boring, if not losing propositions at today's rates. There's very little money to made in bonds today IMHO. And financial advisors keep pushing them. Go figure.
Thank you for the helpful info.. one more question.. what happens if the custodian fails or does something crazy?
TIPX....TIPS 1-10 years duration...nice mix.
So which bond is good for me to invest please?
Thank you.
The question I have is being in my 50’s and my taxable account being all stocks , while the 401k has some bond exposure in the subset that is a 2030 targeted fund , how does one move from say 98% stocks to 65% stocks given the huge capital gains that would be triggered with some of the taxable stock sales I’d have to do?
Hi Rob, I'm Canadian and wondered if you looked at VRIF and what look think of it as a 1 stock portfolio for retirement