Bonds: A Ticking Time Bomb
The old advice of bond ownership during retirement is being turned on its head. The upcoming interest rate debacle is set to make those bonds a major drag on your retirement account. The Bank of Japan has been on an unprecedented purchasing program of Bonds. So much so that now when it is considering changing the asset purchase strategy, we already see an unmatched selloff.
“The impact of the BOJ’s stimulus is that the bond markets worldwide are becoming one market,” said Chotaro Morita, the Chief Rates Strategist at Tokyo-based SMBC Nikko Securities Inc., one of the 21 primary dealers that trade directly with the Central Bank. “If there’s a reversal of policy, you can’t rule out that it would roil global debt”.
Goldman Sachs Group Inc., a primary dealer in both the U.S. and Japan, warned in May that Japan could be the catalyst for the next international selloff in bonds. While there’s no immediate danger of a global spike in long-term yields amid tepid inflation worldwide, any shift in the BOJ’s unprecedented asset-purchase plan would have a ripple effect, according to Francesco Garzarelli, the London-based co-head of global macro and markets research. “A change in tack by the BOJ would be felt on global bonds”.
So where does that leave those of us that are preparing for or are already in retirement?
Bonds are certainly suspect. The Stock Market, there are so many warnings regarding the Equity market and the effects of 2008 still scar many 401k’s, IRA’s, and pension plans. Gold, it’s a great alternative but doesn’t provide any income to live on. So we have to look at what so many of the wealthy people do, Real Estate. It holds value, but in its traditional aspect of buying a house and renting it out often requires more work than the job that you are planning on leaving or have left.
The answer is the untraditional form of Real Estate, this is where the 1% hold their wealth.
Have your money in the security of tangible property without the burden of collecting rent checks, fixing toilets, and the worse scenario, evictions. Every month your funds are deposited into your account automatically, even better your rate of return is 2 to 3 times the rate of return on Bonds and Treasuries.
Call Tangible Assets & Investments to find out more about adding the security of Real Estate to your retirement.