Risk of Bonds To Your Retirement

In my latest YouTube video, I give you insight into what I advise my clients and why I declare the death of bonds as an investment.

Here are just some of the topics I cover in the video:

  • Recommended investment strategies for high-yield returns.
  • Why you can’t retire comfortably with a balanced portfolio.
  • The attitude of successful investors.
  • How the investment industry looks at the stock market.
  • Conventional wrong beliefs about bonds.
  • A balanced portfolio VS an equity portfolio.
  • Two secrets to making money in the stock market.
  • How to evaluate your skill of risk tolerance.

This video is based on a presentation I recently did, which received rave reviews, so I know you’re going to like it! 

Ed

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Ed Rempel has helped thousands of Canadians become financially secure. He is a fee-for-service financial planner, tax  accountant, expert in many tax & investment strategies, and a popular and passionate blogger.

Ed has a unique understanding of how to be successful financially based on extensive real-life experience, having written nearly 1,000 comprehensive personal financial plans.

The “Planning with Ed” experience is about your life, not just money. Your Financial Plan is the GPS for your life.

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8 Comments

  1. Bill Silverberg on April 12, 2022 at 1:24 PM

    Enjoyed your presentation Thank you
    I am 85 , my wife is 79, both retired
    Conservative investors
    50% equities, 50% corporate investment grade bonds
    What should my asset allocation be at this stage in our lives
    What is a reasonable rate of return for our portfolio
    I have a financial plan



  2. Gord on April 12, 2022 at 5:58 PM

    Hi
    Unless I am missing something, wouldn’t it be a better apples to apples comparison if the “magic number” was the same in both scenarios?
    In the first example, with the 35 year old earning 50k, they would only need to invest less than 12k yearly to achieve the same “magic number” as the all equity investment of approximately $775k.



  3. PETER HOOIVELD on April 13, 2022 at 7:52 AM

    Believe it people! As an Equities Only investor for almost 20 years with a Financial Life Plan designed by Ed, I can vouch for the validity of everything Ed says. Bonds ARE dead!…Equities LIVE! If you want your money to work for you, invest in Equities only.



  4. Dan Doyle on April 13, 2022 at 4:20 PM

    Good video Ed. Especially relative with today’s inflation rate of 5.8% or so. Can’t retire if your growth doesn’t beat inflation and MER combined.



  5. Ed Rempel on April 16, 2022 at 2:14 PM

    Hi Bill,

    I don’t know your full situation, but your 50% in bonds is highly likely to lose money after inflation for the rest of your life.

    There are 2 possibilities from here. If interest rates stay flat, you lose money for the rest of your life. If interest rates rise, you can lose a lot more.

    Are you willing to accept an almost definite loss for the rest of your life to reduce short-term market volatility?

    What is your comfort for short-term market fluctuations? Being educated and learning to have a higher risk tolerance can give you a signficantly higher return.

    What is your real time horizon? Are you and your wife healthy? If you are average health, there is a 25% chance that either you or your wife will reach 98, so you have a reasonably long time horizon. Most liekly, that will be your wife, which gives you a 19-year time horizon so you can provide for her for the rest of her life. The stock market has essentially always had a decent gain over 19-year time periods.

    If you really don’t want to move to 100% equities, even conservative equities, there are a variety of less volatile investment options that are not fixed income. As fixed income alternatives, we use a variety of strategies, such as option-selling strategies, market neutral equity strategies, specialty financing, infrastructure equity, etc. They are unlikely to give you equity returns, but should reducee short-term fluctuation and not lose money for the rest of your life.

    The last option would be to put the bonds into a high-interest savingsa account or equivalent. Returns should be only a bit less and they don’t have the risk of a big loss that bonds may have if interest rates rise signficantly. Bonds are really parked money, not a proper investment. If you park part of your portfolio in savings, it will be clear in your mind that it is parked. With bonds, there is a tendency to try to pursuade yourself it is an investment.

    I hope that’s helpful, Bill.

    Ed



  6. Ed Rempel on April 16, 2022 at 2:20 PM

    Hi Gord,

    I don’t understand your question. Each of the 4 scenarios are apples-to-apples. For the 35-year-old earning $50K and retiring in 30 years on $40K in today’s dollars, he/she would need to invest $17,000/year (34% of gross income) in a balanced portfolio and reach $1,150,000 to have the retirement they want. With an equity portfolio and the same goal, he/she only needs to invest $6,500/year (13% of gross income) and reach $775,000.

    They need a lot smaller portfolio at retirement for the same retirement lifestyle.

    Ed



  7. Ed Rempel on April 17, 2022 at 10:22 AM

    Thanks for taking the time to post, Peter!

    Yes, you are living proof it works over the long-term.

    Ed



  8. Ed Rempel on April 17, 2022 at 10:31 AM

    Hi Dan,

    Exactly. Bonds are highly likely to lose money after inflation for the next 30 years. YOu can grow wealth with a significant part of your portfolio losing money over the long-term.

    Ed



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