make that kind of statement, especially coming from a source as trusted as Moody’s, tells me we are closer than ever to the correction that I have been telling my bond service members to look for almost since day one.
You can buy and hold bonds if – and if you are in the low-risk envelope that all retired persons should be, this might be the biggest “if” of your money life – if you buy only short-maturity, high-coupon bonds at reasonable prices… and they are still out there.
And you can only buy them with the understanding that when the correction hits – and it will – you hold them to maturity. Then and only then can you own bonds.
If you stick with short maturity bonds, the market price fluctuation should be negligible no matter what interest rates do. That’s how the bond market works and it will work if you follow two simple rules.
But for the chief economist of Moody’s to make a blanket statement as broad and as incorrect as his was, and at the same time, to put so much money at risk with such an insane suggestion that a correction won’t happen, is beyond irresponsible.
Bonds are safe and can be held even in this market, but there will be a correction and you must set up your bond portfolio accordingly.
by Steve McDonald, Bond Strategist
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