Radical Guide to Bonds: How to Get the Most Out of Your Bond Investments

We hear chatter everyday about another rate hike by the Fed, about expected inflation, or the acceleration in the economy.  All this information is a conversation about the bond markets. 

But from your perspective, what the Fed does with rates in the next quarter, or even next year, is not terribly important.  You really can do without all the current chatter.  Your concerns are further out.

The reason is that your large cashflow needs are decades away.  You will need hard dollars for your kids’ college expenses in ten to twenty years.  You have ongoing mortgage debt payments, stretching out for thirty years.  You will need reliable and steady cash for your retirement, beginning in twenty or so years.

As a retail investor, bond investments solve problems far into the future.  It is about investing for the long-term, for an eventuality on the horizon.  While exceptions abound (e.g., too many retail investors trade small bond lots for gains), the majority of retail bond investors are looking at the long term.

This guide is not about picking bonds.  We leave the choice of bonds to you.  Instead, this guide is about your approach to investing in the retail bond market. 

We have one theme throughout this guide:  what you pay upfront for your bond investments matters.  In this guide and its companion, “How to Buy and Sell Bonds Online,” we’ll show you ways to limit that cost.  It will take some work on your part to find the right broker.  You will have to look for a low-cost online bond broker to use for your bond trades.  Still, it will be worth it.  It will save you money and enhance your returns on these lifelong investments.

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June 3, 2005 | Permalink


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