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Really. As safe as CD's and three to six times as much? Is there no correlation between risk and reward?
If it sounds to good to be true....
Really. As safe as CD's and three to six times as much? Is there no correlation between risk and reward?
If it sounds to good to be true....
Well - would you rather have the "protection" of FDIC which was near bankrupt this past year and will probably ask for more money from the Feds OR would you rather have protection from the government? You have to understand the strategy first for you to understand why it is as safe if not safer than CD's. Read the report first and then we can have an "educated" discussion about risk/reward or any other questions/thoughts you may have.
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Padthaforlunch,
One more thing. Just b/cos something might be out of the realm of what we've experienced or learned about does not necessarily mean it's too good to be true.
Case in point, to help clients get over their disbelief of the "features" of a good Fixed Indexed Annuity, I will often ask clients why they haven't gone down to their dealership and asked for the vehicle that gets over 300 miles per gallon. Their normal response is because they don't believe one exists. Then I introduce them to the aptera - a vehicle that does get over 300 miles per gallon and costs under $30K. You can learm more about the aptera at 300 Miles Per Gallon! Aptera Motors Unveils Ultra Efficient All-Electric and Plug-In Hybrid OR at their website www.aptera.com.
Up until they learned about the aptera from me or someone else, they would have thought such a vehicle never existed.
The same is true about my posting about earning 3 to 6 times as much in interest than what banks are currently paying while having similar levels of safety/protection. Again, until you learn about it, you too might wrongly conclude that doesn't exist either.
Just some food for thought.
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I guess I'm surprised that no on has brought up buying bonds on the secondary market. For example, a few weeks ago it was possible to buy a bond that had less than two years remaining on it that had a yield of 4% or so. Many of these are bonds that are selling at a premium, meaning that the coupon rate could be 6%, 7%, 8% but whose yield is lower because the buyer has to pay more than 100% of the maturity value.
There are two basic advantages of individual bonds over a bond fund: 1) you know what the yield is and 2) you know that even if interest rates fluctuate between the time you buy them and when they mature you will get your money back. (In the case of buying a bond at a premium, you do get all your money back; some of it is in the form of interest payments that are higher than the yield and the balance is when the bond matures for less than you paid.)
I tend to be afraid of bond funds especially when interest rates are on the low side. Bond funds offer the advantage of diversification so if you are talking about $25,000 or less, the bond fund is likely safer. But if you buy 25 $1,000 bonds for a client they will have roughly the same statistical diversification so that advantage goes away.
I DO sell fixed annuities primarily; I have sold "deliberate MEC'S"; there ARE "cash value" life policies where the surrender value is equal to roughly 90%-95% of premium at the end of year one where the year two value might be 2-3% growth (but I agree, "cash value" life for a two year play probably isn't a great idea for the client... but 5 years might be ok). I am a Series 65 so I do recommend non-fixed assets but I spend two hours going through the pro's and con's of approximately 20 different asset classes and then I LET THE CLIENT CHOOSE. Guess what? Most of them choose to have less than 25% in "equities" and the other 75% they split between bonds, fixed annuities and indexed annuities. And... they feel in control because they made their own choices.
That's my two cents worth which if you add another $2.98 to will buy you a Starbucks coffee. (Maybe)
There are two basic advantages of individual bonds over a bond fund: 1) you know what the yield is and 2) you know that even if interest rates fluctuate between the time you buy them and when they mature you will get your money back. (In the case of buying a bond at a premium, you do get all your money back; some of it is in the form of interest payments that are higher than the yield and the balance is when the bond matures for less than you paid.)
I tend to be afraid of bond funds especially when interest rates are on the low side. Bond funds offer the advantage of diversification so if you are talking about $25,000 or less, the bond fund is likely safer. But if you buy 25 $1,000 bonds for a client they will have roughly the same statistical diversification so that advantage goes away.
I DO sell fixed annuities primarily; I have sold "deliberate MEC'S"; there ARE "cash value" life policies where the surrender value is equal to roughly 90%-95% of premium at the end of year one where the year two value might be 2-3% growth (but I agree, "cash value" life for a two year play probably isn't a great idea for the client... but 5 years might be ok). I am a Series 65 so I do recommend non-fixed assets but I spend two hours going through the pro's and con's of approximately 20 different asset classes and then I LET THE CLIENT CHOOSE. Guess what? Most of them choose to have less than 25% in "equities" and the other 75% they split between bonds, fixed annuities and indexed annuities. And... they feel in control because they made their own choices.
That's my two cents worth which if you add another $2.98 to will buy you a Starbucks coffee. (Maybe)
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So gov bonds paying 7%-13%? To which government are you referring? No way do you get anywhere near your claimed returns with T-bonds. Read your report first? How about just sharing your brilliance with us? Safe or safer than cd's? Again, it smells....
Please share with all of us how your secret strategy defies the risk/reward continuum.
Please don't patronize me. I am quite aware of the financial vehicles available on the market.
You have made a very bold statement about your secret investment being as safe, if not safer than FDIC backed savings. The Feds will never let the FDIC run out of money. It would be a catastrophe to not cover the accounts of a failed bank.
I would not lay the same odds on the Feds stepping in to cover a failed muni bond.
Are you suggesting TARP recipient bonds are government secured?
So just what are you proposing that is "as safe or safer" than cd's but guarantee's 7%-13% interest?
Better than stock market returns and safer than cd's. Come on....
Of course, if you want to buy an indexed annuity with a 10% bonus and a 3% fixed account, I can guarantee you 13% for one year. If we just look at income account grow, we can guarantee great returns. But you seem to be implying something else.
The high guaranteed rates and claims of safety shrouded in secrecy sure as hell sound very suspect.
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Yep. The downside is not getting all of your principle back when you buy at a premium and try to sell the bonds close to, or at maturity. But you covered that in your post.
Agree with you wholeheartedly about bond funds being sucky. To me the primary downside is that you lose the guarantees of a bond. You own shares in a fund that trades in bonds. You have no guarantee of coupon or return of principle. You own shares of a fund, and the fund manager justifies his salary by buying and selling bonds.
Some funds may use duration as the primary function for how long they hold their bonds. But just by being in a fund, you lose much of the protection play that makes bonds attractive.
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