The Risk of Investing in Bonds, Ep #106

<p>Why are some bond investors running for the exits? Is it risky to have bonds in your portfolio? Most people associate bonds with being a “safe” play in their portfolio to balance out the “riskier” stocks. But the truth is that investing in bonds can be just as risky. So in the first part of this special episode, I’ll dive into the reason WHY investing in bonds can be a risky play. </p> <p>In the second half of this episode, I’ll share a case study of a current client. It’ll include some tips and strategies that everyone can learn from and apply to their own retirement planning. (HINT: It’s all about identifying and eliminating gaps in your retirement planning). Don’t miss it! </p> <h2>You will want to hear this episode if you are interested in...</h2> <ul> <li>[2:06] Build your retirement action plan at <a href= "https://retirementmadeeasypodcast.com/resources/" target="_blank" rel="noopener">RetirementMadeEasyPodcast.com </a></li> <li>[2:57] The risk of investing in bonds in your retirement portfolio</li> <li>[9:08] What is your budget for retirement?</li> <li>[13:19] How much do you need to save for retirement? </li> <li>[16:23] Don’t forget to factor in the cost of health insurance </li> <li>[17:43] What rate of return do you need from your investments? </li> <li>[18:18] How you get income from the investments in your 401k</li> <li>[20:26] What gaps exist in your retirement plan?</li> </ul> <h2>The risk of investing in bonds in your retirement portfolio</h2> <p><em>What is a bond?</em> If you buy a McDonald’s corporate bond for $10,000, you’re essentially loaning $10,000 to McDonald’s and they pay you interest for 10 years. Let’s say the interest rate is 2%. So they’re paying you $200 in interest every year. At the end of the 10 years, they give you back your $10,000. That’s the idea behind a bond. You’re getting a payment. </p> <p>But let’s say interest rates dramatically rise. Now, you can buy a bond that pays a 4% interest rate. No one is going to buy your McDonald’s bond that’s paying 2% interest when t