San Diego Housing Market News and Analysis
Bonds...And Rising Interest Rates....
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Submitted by flu on December 7, 2012 - 11:39pm
Ok. So I hate bonds...Because maybe just that I'm an idiot and don't understand them well enough... But to me they seem fakey safe investments... By that I mean, on paper, they seem to look like a safe investment.. Invest X ,get Y% return year over year...But to me they don't seem to be as "safe" as people make them out to be...
What is the ideal economic situation do you make money on a buying bonds?
(Simplifying assumption is that that bond is for a "safe" investment... It's yield is not dependent on credit worthiness of company/institution/etc)....
It seems like the ideal situation would be if you bought a bond that costs $X with yield Y%, and then you have a prevailing interest rate that continues to fall... so that the price of the bond goes up...
So does this mean, in the opposite environment, in which you have a environment where you have a perpetual rising interest rate environment, that the bond value will start to get killed?
If so, why would one want to buy bonds if one anticipates we'll have an environment where interest rates will be rising steadily?
I'll admit, I never bothered to really dig into bonds, beyond just picking an index fund out of a basket of other index funds. And thus far have been lucky....
But curious/inquiring minds now want to know.
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