Bonds just feel safe. Ken Fisher explains that the very name even implies safety — as in, "My word is my bond." Far too many investors with long – term growth goals load up on bonds, presuming they’re safer than scary stocks. But are they? As Fisher looks deeper into this bunk, he discovers that depends largely on how you define "safe".
Ken Fisher asks these questions to find out. Does "safe" mean a high probability of lower long-term returns with less near-term volatility? Or is "safe" increasing the probability your portfolio grows enough to satisfy your long-term growth and/or cash flow needs? If you need a certain amount of growth to maintain your lifestyle in retirement, you might not feel so "safe" when you discover having too little volatility risk for too many years later means you must subsequently dial back your lifestyle. And you may not feel "safe" when you must explain that to your spouse — particularly if in that future there is any huge inflation spurt (always possible).
Bonds Can Be Negative, Too
Yes, stocks can be pretty darn volatile and scary — near term. But Ken Fisher reminds people that they forget: Bonds do sometimes lose value in the near term too.
Read more details of BUNK 1 in Ken Fisher's Debunkery.