Now is a poor time for bonds and a worse time for stocks. In fact, now is a terrible time to be in US dollar-denominated currencies period. As soon as it becomes clear that our troubles cannot be whisked away by fiscal policies, this bear market rally will end. Then the pain shall truly begin.
As for those that are suckered into buying stocks now by articles like this one — there is a name for you… ‘Bagholders’.
Maybe. It’s always a good idea to hedge your bets with the financial markets. Both the stock and bond markets are very risky and volatile. Some advisors recommend a 50/50 approach (50% stocks, 50% bonds and cash). Hey, it’s easy to do the math !
Rebalancing is also very important. It should be done quarterly (or more often). Both bonds and cash have handily outperformed the S&P500 over the past 10 years. This probably indicates that it’s good to start moving slowly back into stocks; stocks could still go lower. In addition, it’s good to take profits. If you have some big gainers, reduce your exposure to single stocks.
Some foreign stocks are good: I like the EAFE (developed foreign markets). With foreign and domestic stocks, this is a stock-picker’s market; the tide will not lift all boats. Indeed, it will sink the ones with leaky hulls. In this environment, a value approach will probably do better than a growth approach, as there isn’t much growth. Also, consider an income approach, based on dividends and capital gains distributions.
Most of all, don’t risk money in stocks and bonds that you can’t afford to lose; keep that cash reserve of about 12 months expenses in a dry, safe place.
Bonds are for those who have too much money and want to keep it – stocks are for those who do NOT have enough and want to build it. I think it is just that simple based on 100 years of financial history.
At this time, bonds are a lousy investment and stocks are a lousier investment. The stock bubble has already burst while the treasury bond bubble is going to burst shortly. The treasury bond market is supported by the record trade deficit where the dollars are recylcled into treasuries. As american consumption ratchets down with the recession, the trade deficit will come down with, with less dollars to recycle, the treasury bonds will come down with the long interest rates soaring.
Mark Twain 1800s “BUY LAND they arent making any more of it.”