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Banned
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First World problems are, at the end of the day, still problems.
But usually nicer to have than Other World problems.
So enjoy 'em while you have 'em ! !
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I have roughly equal amounts in shares and bonds...the average return, (for my portfolio), from shares (dividends not cap gain) is several % points greater than bonds. Bonds in last several years have as you say been dropping and are not as attractive currently as dividend yields available. Most of my bonds were purchased in 2012-2013 when good yields were more easily available. Personally I think it comes down to how conservative you are. A bond will still be better than a TD in all probability but does have the advantage over shares of not being as vulnerable to share market volatility. Its all relative...in a climate of capital loss and 3% divs..a bond at 4.5% looks good. A share market crash/correction gives good opportunities (IN SHARES NOT BONDS) for a long term thinker.
Originally Posted by PSE
Hmm, back to square one if they reset then they are limited in capital appreciation so may as well own the shares.
In terms of portfolio allocation though a buoyant economy causes a rising stock market would cause a rising interest rate environment and falling bond prices (rising yields).
On the other hand a recession and falling stock market would cause lowering of interest rates and rising bond prices.
Right now these rules are out the window we have low interest rates and a sharemarket bubble and most bonds are like this one not long dated or with recall options anyway. I would have loved it if there were some good bonds around I would have been 75% bonds by now as the bubble is obvious.
I know what you are saying, lowering interest rates makes shares more attractive but the reason central banks lower interest rates is to counteract the recession which is causing shares to fall.
Hope y'all can follow my somewhat convoluted logic, the guts of it is that shares and bonds are normally (perhaps not right now) negatively correlated so having a bit of both should increase returns where investors are doing the opposite of what the market is doing.
That is selling their shares into bonds during a sharemarket bubble and selling their bonds into shares in a sharemarket crash.
As I say I haven't bought bonds and this is a big gap in what I am doing, so appreciate your thoughts.
Last edited by BIRMANBOY; 27-08-2015 at 11:05 AM.
Reason: clarification
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Originally Posted by PSE
There are worse things than paying tax on profits, I am buy and hold on shares but if I had to pay tax on bond capital appreciation it would be no big deal.
Good to know but a first world problem making too much money darn have to pay tax
Paying tax is good as it (normally) means you are making a profit. Just pointing out that it has to be factored in when comparing.
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