Should investors even bother with bonds?
Interest rates are very low right now, and have been for a while. The 10 year US Treasury Note yields 1.46% today and the 10 year government of Canada bond yields even less at 1.40%. Shorter term bonds yield even less. Five year GIC rates are a bit higher at around 2% or more from smaller banks and credit unions. Meanwhile, the latest inflation rates (CPI) for end of November was 4.7% for Canada and an astonishing 6.8% in the US – the highest since 1982. So, should investors even bother with bonds now? Here’s my advice:
- Make sure you have set aside enough cash money for emergencies.
- Make sure you have enough income and or cash / short term bonds like T-Bills for your retirement income for the next five years.
- Have the rest of the money invested in places other than traditional bonds:
- real return bonds or TIPS
- mortgage funds
- high quality blue chip dividend paying stocks
For a discussion of this topic by other financial professionals and myself, please see this article on moneysense.ca. For specific advice regarding your own circumstances, please call us.
Financial Blogger at Lycos Asset Management
My expertise in the investment and financial advisory profession began in 1972. I graduated with the Bachelor of Engineering from General Motors Institute in 1971 and then attended UBC, graduating with the MBA in 1972. I retired in 2022.
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