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Bonds yield higher returns now than the S&P500. Claiming that there is no alternative is financial illiteracy. I suspect most folks simply don’t know how to bu
by mrcode007 3y ago
Bonds yield higher returns now than the S&P500. Claiming that there is no alternative is financial illiteracy.
I suspect most folks simply don’t know how to buy different kind of bonds and resort to buying bond funds or ETFs etc.
- andsoitis 3y ago> Bonds yield higher returns now than the S&P500. Claiming that there is no alternative is financial illiteracy. For the record, I don't think I claimed there is no alternative. While bond yield might be higher right this instant (or for the last 6 months, say), does not automatically mean your risk-adjusted return over 20 years is likely to be higher (historically shares have outpaced bonds by a fair margin). Which makes me wonder where you are putting your money and consequently whether: (a) you would advise putting one's investment money into bonds and (b) at what point would you advise to switch and (c) do you think there's something that would be even higher yield than either
- CameronNemo 3y agoSorry I signed an NDA with my time travel provider. Just wait six months, you'll figure it out.
- andsoitis 3y agoYou might have said this in jest, but I think it is a strong argument against the possibility of time travel into the past.
- datadrivenangel 3y agoefficient market hypothesis. No time travel because all valuable information has already been sent back through time.
- eru 3y agoThe answer from financial theory is that you should be buying the market portfolio that includes stocks and bonds (and other assets) in the same proportion as their market capitalisation.
- tekla 3y agoLooks at my return rates of ~8-9% on S&P 500 Excuse me, what bonds are returning that?
- jaggederest 3y agoIs that an inflation-adjusted return? Just curious, same thing applies whether you're comparing nominal return or real return, I just know there are "inflation-protected" bonds.
- tekla 3y agoAnd what are those inflation protected bonds returning?
- mrcode007 3y ago1.4% in TIPS auction from today.
- mikhailfranco 3y agoThe Fed buys TIPS to suppress the yield (inflation expectations). I know, that should be illegal, but when does that ever stop them.
- HDThoreaun 3y agoManaging inflation expectations is the Feds main job.
- dragontamer 3y agoAnd what are the inflation adjusted returns of Stocks over the last year or two?
- tekla 3y ago3%. Still higher than inflation protected bonds.
- embwbam 3y agoHow much are you missing out by buying bond funds? Why would there be much of a difference?
- mrcode007 3y agomanagement fees plus the fact that a fund has a single risk utility function applied across the pool of all investors in the fund, where the investor's wealth is absent from the state variable. the investing math is different if current wealth is taken into account or not.
- devoutsalsa 3y agoBonds don’t out perform stocks over the long term. Buying bonds makes sense for risk averse people seeking fixed income with tax advantages, or speculators planning for a drop in interest rates. There may be a few 20 year periods where the stock market itself was flat, but anyone who had been buying during that whole time would have seen positive returns.
- ffhhttt 3y agoAlso significant inflation = higher stock prices, while your principal would only decrease in value if you buy bonds.
- devoutsalsa 3y agoI've always thought that inflation causes stocks to suffer, for a couple reasons. One, higher interest rates on government bonds means risk free interest rates can approach, or even exceed, the typical expected return for the stock market. Second, inflation reduces consumption, which reduces profits.
- ffhhttt 3y agoShort term that might be the case. However longterm (as long as the economy continues growing) you would still expect nominal earnings and revenue to increase at least at the same pace. Also it varies a lot by sector, consumer staples for instance have been doing quite well over the last year. If you have double digits inflation and can’t/don’t want to buy foreign currency the stock market is probably the best place to be. Just look at Turkey: https://tradingeconomics.com/turkey/stock-market https://tradingeconomics.com/turkey/stock-market
- wing-_-nuts 3y ago>I suspect most folks simply don’t know how to buy different kind of bonds and resort to buying bond funds or ETFs etc. Have you ever actually used treasury direct to buy bonds? I cannot fault anyone for buying an ETF over using that horrible website.
- mrcode007 3y agobonds don't always mean sovereign bonds such as US treasury bonds. There are also corporate and municipal bonds.
- mint2 3y agoI dunno, maybe I’m weird but I find treasury direct to be pretty functional. I’ll take it any day over the likes of Citibank.
- lostmsu 3y agoThey locked my account for "security reasons" and to unlock it you need to physically mail a 3 page form. I only ever used it once.
- wing-_-nuts 3y agolol same. You have to enter not one but like 5 different security questions now. It's insane. I had to call in and have them reset my password that way.