Can someone explain why people are told to start investing in bonds as they near retirement?

Can someone explain why people are told to start investing in bonds as they near retirement?

If the goal is to achieve stability with your money by avoiding the ups-and-downs of the stock market, why not just put the money into a normal bank account? I mean, bonds are down 7% over the past 20 years. That's volatility with you literally losing money, which a bank account will not do.

Explain pls.

  1. 2 weeks ago
    Anonymous

    Anon are you retarded? You can hold bonds to maturity.

    • 2 weeks ago
      Anonymous

      savings accounts don't yield as much as treasuries, and also your counterparty would be the bank as opposed to the Treasury also

  2. 2 weeks ago
    Anonymous

    buying bonds didnt make sense until just this last year. now it actually has some yield. but if you bought before 2022 you wouldve got justed

    • 2 weeks ago
      Anonymous

      It also made sense before the ZIRP. It was just during that period where they stopped making sense.

  3. 2 weeks ago
    Anonymous

    What I would like to know is what happens to bonds if we experience a 2008 style crash? Someone wrote in another thread that the bond market will go off a cliff and that yields will rise. What exactly did he mean by yields will rise?

    • 2 weeks ago
      Anonymous

      Yields are the interest rates you are paid for holding a bond. When yields rise, the value of preexisting bonds with lower yields declines if you were to sell those bonds before expiration. Typically yields go down in crashes because they are a safer investment than equities and money goes into safer assets. However, there are many people that believe that if we were to enter a financial crash that the fed would be forced to buy up bad debt to stabilize the system, which would devalue the dollar and bonds.

      • 2 weeks ago
        Anonymous

        The second part of that is geared towards government bonds more particularly, corporate bonds are also a thing.

      • 2 weeks ago
        Anonymous

        >the fed would be forced to buy up bad debt to stabilize the system, which would devalue the dollar and bonds
        It causes a bond bull run though. I think the curve is still inverted because everyone wants to own 30 year bonds for what they see as the inevitable fed pivot that will make them rich owning them.

      • 2 weeks ago
        Anonymous

        not exactly. you mean coupon rate.

        the yield is what you make when you take into account the price, face value, and coupons as long as you hold the bond may or may not include the maturity payment if you hold it that long

        • 2 weeks ago
          Anonymous
    • 2 weeks ago
      Anonymous

      the reserve props them up and the show goes on.

    • 2 weeks ago
      Anonymous

      nothing happens to them per se, you can still hodl them, however if you were to liquidate them you could buy into the stock market, real estate or what have you for a steep discount, so it's a matter of lost opportunity cost.

      also what

      Yields are the interest rates you are paid for holding a bond. When yields rise, the value of preexisting bonds with lower yields declines if you were to sell those bonds before expiration. Typically yields go down in crashes because they are a safer investment than equities and money goes into safer assets. However, there are many people that believe that if we were to enter a financial crash that the fed would be forced to buy up bad debt to stabilize the system, which would devalue the dollar and bonds.

      said, but most people aren't bond traders, they click a few buttons in their banking application, like meself

    • 2 weeks ago
      Anonymous

      yield goes up if the price moves lower than face value. if the bond has a face value of $100 and the price is $98 you are getting more bang for your buck on the coupon payments at a % of 100. so if the coupon rate is 3% you are getting $3 coupon payments for cheaper. so its higher yield

  4. 2 weeks ago
    Anonymous

    Furthermore, when is a good time to buy bonds? What conditions are required to be in place?

  5. 2 weeks ago
    Anonymous

    Because you lock in fixed income, and they are less volatile at the maturities you’re buying them at. Generally when people rotate to bonds they buy the AGG and not just TLT.

    But also yes even the AGG is getting slaughtered currently, that’s off the back of a 40 year bull bond run getting buck broken though, these past couple of years have been absolutely exceptionally unique for the bond market.

  6. 2 weeks ago
    Anonymous

    >Can someone explain why people are told to start investing in bonds as they near retirement?
    You get to lock in that rate. The bank account aka short term fluctuates wildly

    If you buy EDV you're locking in 4% returns. And LTPZ you're locking 2% and then whatever inflation happens to be. For 20+ year durations

    But boomers usually buy the market which is like 7 years

  7. 2 weeks ago
    Anonymous

    Bonds tend to a better long-term investment than cash.

    Also, bonds tend to be less correlated to stocks than cash, so they reduce the volatility of your portfolio, allowing you to invest more aggressively.

  8. 2 weeks ago
    Anonymous

    Fucking Christ nobody here knows what they're talking about. fuck off all of you. this place is an absolute shit hole

    • 2 weeks ago
      Anonymous

      The thread seems decently correct to me so far. What do you see as wrong?

  9. 2 weeks ago
    Anonymous

    Bonds worked fine for decades, it's only recently that market values tanked and the low-risk meta broke. Adding in a little Bitcoin seems to be the growing consensus.

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