Bond Investors Beware the Bubble

Bond Investors Beware the Bubble
News from ABC News:

Bonds, which have been in a bull market for 30-plus years, may have lulled investors into a state of complacency as prices have risen and volatility has been low.

Incorrectly viewed by many investors as a risk-free haven, bonds go through long bear markets in which wealth is destroyed. The last bear market in bonds started in 1940 and lasted until 1981. During that period, bond investors lost money in real terms due to rising inflation and interest rates.

Investing is more complicated than getting your money back with interest. The greatest threat to investing successfully for retirement is losing your purchasing power from inflation. Inflation acts like a master pickpocket. Instead of stealing your wallet, it effectively switches $ 100 bills for tens over time. You don’t realize you’ve been robbed until later, when you go to buy something, reach into your wallet and are shocked to find you don’t have enough money.

Investors view bonds in general as being less risky than stocks because they are less volatile, and government bonds as being highly secure because there’s a high probability that they will get their money back.

Contrary to the popular view that government bonds are always an ultra-safe investment, the current bond bubble includes Treasuries, signaling risk aplenty, according to professionals including legendary v…………… continues on ABC News

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Specialist investment trust tips for 2013: Part three
News from Interactive Investor:

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

The biggest disappointments of Money Observer’s investment trust tips last year were Phaunos Timber FundĀ (PTF) and Catco ReinsuranceĀ (CAT).

Phaunos has been hit by soft markets for timber, as well as continuing worries about its corporate governance. Catco has proved far more vulnerable to catastrophes than its prospectus suggested it would be.

We are retaining the former, but dropping the latter in favour of a single-manager hedge fund. Funds of hedge funds have fallen from favour due to their high charges and disappointing returns. The…………… continues on Interactive Investor

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