The High Risk of Bonds (podcast on The Maple Money Show)

The High Risk of Bonds

Maple Money podcast with Ed Rempel

I was recently interviewed by Tom Drake on The MapleMoney Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom.

Most investors see bonds as a safe place to put their money, but conventional wisdom may be deceiving. Investing in bonds can actually put your portfolio at risk.

To help us understand the risks of long-term bond investing, we discuss a couple of scenarios using the 4% rule. This tried and true concept of retirement planning says that when you retire, you should be able to draw 4% from your investments every year increasing by inflation, and have your savings last for the remainder of your life.

Ed has tested this rule with different asset allocations, and while it largely holds up for portfolios with equity holdings of 70% to 100%, the chances of success drop dramatically as bond exposure rises.

Episode Summary

  • How bond investments work
  • The case against bonds as a low risk investment
  • Between 1940 and 1980, bonds lost half of their purchasing power
  • If you can’t tolerate short term portfolio losses, you should consider bonds
  • How does the 4% rule work with bonds?
  • Over the long term, the stock market is easier to predict than the bond market
  • As a general rule, the less bonds you have the better off you’ll be

The High Risk of Bonds


Planning With Ed


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.

Get your plan! Become financially secure and free to live the life you want.

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