How to Prepare for the Treasury Bond Apocalypse by Alexander Green
http://www.investmentu.com/2012/August/ ... lypse.html
The current divergence between stock prices and bond yields is at it widest level this century. Either yields will rise sharply as money rotates into stocks pushing asset prices markedly higher or stock prices will fall to close the gap with yields.
Using the Any Market Portfolio can help you over the rough spots, get you to the point of making a very good return and keep you out of all the usual minefields that only create losses.
Using this portfolio strategy successfully will require you do few things differently:
• Have at least one bond per year maturing. That will make cash available on a regular basis to buy into a rising interest rate market.
• Own only ultra-short bonds. That’s a maximum of an eight-year maturity. That will limit the downside and hopefully keep you in the game when the market starts to sell off.
• Buy small positions. It’s one thing to watch a $5,000 investment drop in value. It is an entirely different picture to watch a $50,000 one dropping. It’s a head game I know, but it works.
Even in this market, there’s a lot of safe money to be made in bonds, but it’ll require you play by a few new rules.
You can be on the “safe side,” but you have to own the right bonds and recognize that at some point their market value will drop.
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