| Editor's Note: Earlier this week, the Federal Reserve hinted at more interest rate hikes in 2024... so we wanted to let you in on an important opportunity. In today's guest article, our friend Marc Lichtenfeld, the Chief Income Strategist at The Oxford Club, is talking about several plausible scenarios that could make bonds even more valuable than they already are. He's also showing investors how he's loading up on fixed income for the foreseeable future. Click here to learn more about his latest fixed income play. - Ryan Fitzwater, Publisher Marc Lichtenfeld, Chief Income Strategist, The Oxford Club In the latest episode of my State of the Market video series, I talked about how there's no such thing as a Goldilocks, or "just right," market. Investors often think the market is too hot or too cold to put new money to work. You can always find a reason not to invest. But there's a way you can invest your cash, earn interest and not worry about losing money. Bonds. Notice I didn't include the word "funds" after. Like Elvis and the hound dog, bond funds are no friend of mine. I'm not a fan. If you invest in a bond fund and rates go higher, you are nearly guaranteed to lose money because bond prices fall as interest rates rise. As a result, the value of the bond fund will fall as well. If you own individual bonds, the same is true (bond prices will fall if interest rates go higher), but that is irrelevant if you plan on holding the bonds until maturity. Bonds mature at $1,000 no matter where they trade beforehand. You could own a bond that's a real dog and trades all the way down to $800. And at maturity, it will be redeemed for $1,000. The only way that won't happen is if the company goes bankrupt. So barring that rare occurrence, bondholders will get their money back - or earn a profit if they were able to buy the bond at a discount - and collect income along the way. Here's why I'm so excited about bonds now. After years of record-low interest rates, bonds are finally sporting decent yields. You can get bonds of high-quality companies with 6% or 7% yields. I'm talking about companies like JPMorgan Chase and Ally Financial. And the timing couldn't be better. |
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