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Get Out Of Bonds!

There are several major asset classes in the investment markets: stocks, bonds, real estate, commodities, precious metals and cash. Although you cannot time the market you can read the writing on the wall and change the weighting within your portfolio to the changing economic conditions. Right now I think it's obvious that bonds have a much, much greater risk to your portfolio than any other asset sector.

My leading motto is: " I'd rather be approximately right than precisely inaccurate". Right now bonds have little upside potential and enormous downside risks so why would any rational investor buy bonds at this time??

Whether you agree with me or not there is a review I would highly recommend at this time. At least review your portfolio, IRA and 401K and quantify your exposure to bonds. Review for the following:

  • Bonds -- the longer the maturity date the higher your risk
  • Bond Funds -- again the longer the duration of the portfolio the greater the risk
  • Balanced Funds -- do you know what the ratio of bonds is in the portfolio? The higher the ratio of bonds the higher the risks
  • Income Funds -- how much of the income comes from dividends and how much from interest? The higher the ratio of income from interest the higher your risks
  • Target Date Funds - Normally the ratio of stocks to bonds changes the closer you get to the target date. The closer the target date the higher your bond risk is.

I would be a fool to predict when the bond bubble will burst - I have no idea if it is tomorrow, next month or next year but I can predict that it will happen. The one given is the longer you stay invested in bonds the more risk you portfolio is taking.

Don't say you weren't warned.