Are Bonds Hurting Your Chances Of A Good Retirement?

What don’t you know that’s causing your results to be worse then they have to be?

Right information?

Right timing?

Right trading?

Right symbols?

Right newsletter?

Right income?

Right education?

Right amount of time?

Honestly probably none of them.

I’m asking because I had an enlightening conversation with a past Training student on Monday. And what he said brought a level of clarity that I wanted to share with you.

I asked him, What he got [from the training] that he didn’t expect or might not have even been looking for?

His answer, “clarity of where my assets should be and when they should be there.”


He then said,

The thing is RC, I kind of knew where my assets should be but I didn’t know if I was right. I mean really right. I mean black and white right. And not right based on a purchased newsletters. Or right based on my Merrill Lynch advisor. Or right based on someone’s opinion. But right based on growing my money regardless. Protecting my money. I wanted to know, ‘Am I really going to be okay?’

And the thing is, if you talked to this guy before he ever knew my name, he knew what he was talking about. He’s the guy that others go to with their investing questions.

But the one thing that was missing in his investment life was, “am I really in the right place at the right time… really?”

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“The question, “Will I be okay?” is what’s really plaguing people.

Because here’s the thing…

…parts of people already know somethings wrong. The old ways of “being okay” are not working anymore. Take the 60/40 stock/bond split that has been used since the 1970’s as a way to lower volatility yet keep a great upward sloping increase in account size.

The 60/40 stopped working as planned.

As investors saw their “60/40” portfolios fall by as much as 45% in the 2008 Global Financial Crises. And now they’re seeing their bonds fall as stocks do too. 

And its not just me.

Bob Rice, Chief Investment Strategist of Tangent, Mark Cussen, CFP and Alex Shadhidi, adjunct professor of California Lutheran University and managing director of investments with Merrill Lynch in Century City are talking about how the 60/40 approached stopped working.

This paper even talks about how there are periods of time when the 60/40 approach acts exactly like a 100% stock approach.

Knowing something is wrong but not being able to articulate it, is what’s keeping people up at night. They like their big-box adviser but s/he didn’t exactly side step the last drop. Were they even in business?

I was taught that one’s age matters most to proper allocation and investing.

I was taught that the higher your age the more “conservative” you have to be. And in the world of investing, “conservative” means bonds. But look at the 10yr US Treasury below.

Are bonds hurting your chances of a good retirement?

are bonds making you poorer?

The red vertical line shows the peak in price of the 10yr US Treasury. And then look over to the far right and you can see that this price is not only not correcting but is in fact breaking down even harder.

When people think of being conservative, they possibly think of owning something with lower volatility. Bonds do have lower volatility (at least they have in the past). But I’m sure what conservative investors are also thinking is with that lower volatility they are also owning something that is increasing in price.

What if their assumptions are wrong?

I was taught value stocks are great long term investments that beat the market

But how do I know if that’s true?

Look at the price chart below.

It shows value stocks (SPYV) being divided by the S&P500. Both symbols include their dividends too. What I see is that value stocks have underperformed the stock market for more than 16 years.

are value stocks making you poorer?

Value stocks did not underperform every year but when you take a step back, the message (and trend) is clear. Value is not safer… or better.

I was taught dividend stocks are best for people who want income and stability

But is that true?

Does dividends equal more money? Meaning, is really better to buy dividend producing stocks over the general stock market?

Yes the income might be higher BUT is the overall total income (income + price appreciation) better?

One sector that has one of the highest dividends/yields (almost double of the market) is the telecommunication sector.

Look at the price chart below. It shows US Telecommunications ETF: IYZ being divided by the stock market. Again both ETFs have their dividends included in the price.

are dividend stocks making you poorer?

When the black line above is falling that means this high dividend paying ETF is underperforming the stock market itself.

And even though the dividends from that telecommunication ETF were bigger the capital gains were so much smaller that all the benefit from the dividends was being diminished by the slower capital grow.

The world has moved beyond information and speed. It’s now a race to Eliminate.

Getting back to my training client.

He knew about charts and charting. But he had never been trained. You see a trainer installs behavior where an educator installs information.

And as you’ve heard me talk before information has become so free and available that access to it has become very expensive.

But not in the way we’ve been taught. It’s costing people their attention and time. And while money can be lost and accumulated. Time cannot.

Time can only be spent. You can’t collect time. Save time. Or hoard it.

Sure the market has always come back from all of its drops but what about the five, ten or 15 years it took to get back to that point?

Investing is as much about time as it is about being on the right side.

When people are buying bonds, value stocks and dividend/income stocks what they are saying at some level is, I don’t have the time to make it back again.

The [investment] world has changed.

Safety is not found in bonds, income, dividends and value anymore. Its found in being certain that your money is in the right place. Really the right place.

If you’re worried your approach might not be what’s really best for you, then let’s jump on the phone and take a look at your approach and portfolio and see what can be shifted. You can book a call right here

In Your Corner,

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RC Peck, CFP



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