Bonds and income investing is not glamorous. Many would call it downright boring. How you start a race, investing, often determines how you finish. Choosing a strategy that insures how you finish is important.
It would be nice if we could all count on a double-digit return with our investing portfolios each year. That’s is not realistic, yet that is for many investors, the baseline measurement for a successful trading strategy. Everyone is happy during a bull market and everyone quickly becomes discouraged during when financial markets are bearish. Investors seeking to strike a balance between greed and fear will eventually win the race.
Younger investors tend to tip the scales towards greed. Investors nearing retirement fear market uncertainty. The thinking of the younger investor is, there is plenty of time left. The investor nearing retirement years think the clock is ticking towards the end. To some extent both are correct. However there is a difference between needs and desires.
Asset allocation of your portfolio is dangerously boring to observe. A total return of 8-9 percent is not as attractive as friends and relatives who brag of double–digit returns year after year. You investing strategy should be uniquely yours. Following the pack could easily lead you and your portfolio off a cliff.
The last 18 months the markets have changed the way many think about investing. If your portfolio loses 15 % in a given year, you will need an 18% return the nest year to get you back to where you started. You will become fearful and that fear will force you into bad decisions.
Structuring a portfolio that is a blend of U.S. Treasurys, high-quality corporate bonds, high-yield debt securities, and diversified blue-chip stocks will help you toward the finish line with something leftover.