Thursday, February 25, 2016

Stocks for the Long Run 2

This article in the economist points out that stocks for the long run does not always work. There was also another article suggesting that 2016 will maybe like 2008 (or perhaps 1998). There are people who have been threating us with a bear market and recession for a while. It will happen when it happens.

I still am going forward with stocks. This is because interest rates are so low. Of course the low interest rates have been going on for quite a while. These sorts of things go on for a lot longer than you would ever imagine.

People have been waiting for interest rates to get back to normal for years. It is hard to say when this will happen. This time around with low interest rates we have even got into negative interest rates which at one time it was thought to be impossible.

I am not saying that I will never go into bonds again. I just do not think that now is the time because of the very low and negative interest rates. Eventually bonds will have to go into a bear market; that is rates will have to rise. Remember that interest rates and bond values go in the opposite direction. We have had a hell of a bull market in bonds and it just seems to be going on and on. But nothing will last forever.

Also, what people do not talk about is that the bond market is much volatile than the stock market. Changes in interest rates can greatly affect the value of bonds and the longer the bond term, the greater the effect. On the other hand, you can safely buy bonds if you buy and hold until maturity. If you hold a bond until maturity, you will get the interest promised plus you capital. Of course, you need to ensure that you are buying a high quality bond for this to happen.

On my other blog I wrote yesterday about Bombardier Inc. (TSX-BBD.B, OTC-BDRBF)... learn more. Tomorrow, I will write about ARC Resources Ltd. (TSX-ARX, OTC-AETUF)... learn more on Friday, February 26, 2016.

Also, on my book blog I have put a review of the book The Fourth Revolution by Micklethwait, Wooldridge. learn more...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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1 comment:

  1. I see the bear market as an opportunity to buy stocks cheaply. I have a watch list of stocks that I would like to own. I am keen on bonds as well but like you said, it is still too expensive. With stocks and bonds, we have to be patient and wait for the right price.