Bond Alternatives May Be a Good Idea Right About Now
Most people think bonds are safe, but in today’s volatile climate, they are not.
In the not-too-distant past, bonds were portrayed as a secure part of a portfolio – a safer investment than stocks. Investors looked to government bonds as the bedrock of a stable retirement income. But bond yields are extremely low these days, prompting some investors to seek alternatives. This has sparked renewed interest in various investments that can generate passive income and stability.
Most people don’t remember what a bad bond market in the opposite direction of interest rates. If interest rates rise, bond prices fall, and vice versa. The Federal Reserve has indicated it will be and slowing its purchase of bonds, so the climate is likely to be less favorable for long-term bonds going forward. And with bonds paying historically low interest rates, long-term bonds falling in price could mean a low-yield investment for years.
