Bond Investments Will Blow Your Retirement

Bonds have long been a safe — relatively — investment for those who want a financially secure retirement, but that may be changing. Investors seeking safer investment options are creating a “bond bubble.” Given what’s happened to all past bubbles, is it possible that bond investments will blow your retirement?

The “bubble” of bond investments will blow your retirement.

Bond investments will blow your retirement

As we seek more secure investments and safer returns…

…the panicky flight to safety is creating a new kind of bubble, this time in the U.S. bond markets. The supply of safe assets, which historically meant AAA-rated government bonds, mortgage-backed securities and gold, has been declining precipitously over the past few years.

It’s not looking good for bonds — of any kind.

…U.S. Treasuries are the last last resort; as investors have flooded into them, yields dropped to 220-year lows. The practical result is that if you own T-bills, you are basically paying the government for the privilege of babysitting your money while you go nowhere.

There are other options, however.

…remember real estate? Ouch, you do. Sorry. But it’s looking to be a safer bet. The asset that caused our financial freak-out has, by many indicators, bottomed out. Building permits, the leading indicator of future construction, jumped nearly 8% in May; that sets the stage for some major construction this summer. “Interest rates are low, prices are low enough to encourage buying, and yet rents are rising–a kind of dividend which may well beat inflation,” notes Paul Ashworth, chief North American economist at Capital Economics.

What were once safe investments may not be any longer. Consider other options because it’s possible that bond investments will blow your retirement.

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