There is an investment that’s better than stocks, provides growth and legally obligated income, and yet only 14% of U.S. households own it.
This investment is bonds and it often provides superior returns to stocks when accounting for fees, expenses, taxes, and the risk of bad timing.
With stocks, you need to make two right decisions in order to make money – when to buy and when to sell.
With bonds, you only need one right decision – the decision to buy and hold.
The Dow was at 1,000 in 1965 and ended in the same place in 1982. If that happened during the period you were saving for retirement, you would have been out of luck.
Bonds generally increase in value when there is a bear market in stocks, commodities, or real estate, because of the flight to quality that follows a market crash.
There are even bonds that help you avoid paying federal income taxes and even state and local, it’s the best legal tax shelter available to individual investors.
But during a credit crisis, bonds can fall due to no fault of their own.
When investors cash out, institutions have to come up with big money fast, which forces them to sell bond holdings they don’t want to.
This causes bond prices to fall by hundreds and hundreds of dollars, practically overnight.
Yields soar higher as a result.
But the bond’s terms haven’t changed. They are still legally binding, with both income and growth potential.
During these moments, you can swoop in and buy them for dirt cheap, and lock in a legally obligated return.
At the beginning of 2022, a six-month Treasury bond paid an interest rate of 0.22%. The same bond today pays 4.76%.
But these yields are small compared to some of the top bond investments you can buy today, some are paying as much as 7.5%.
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