Thursday

Why Your Financial Guy Won't Sell Your Bonds

With current yields on bonds at record lows which translates to record high prices for bonds, you are probably wondering why not sell and take a profit?  Why your financial guy won't sell your bonds?

Let me tell you why.  Bottom line is that most stockbrokers or financial advisors get paid via fees and not commissions.  They get paid for money that is invested.  If they sell your bonds and go to cash, then they do not get paid at all.
the bond bubble of 2012 is about to burst!

Cash on your stockbrokers books is useless to them which is why you are arm twisted to be fully invested all the time, whether it is stocks or bonds or mutual funds.

Remember that in order to collect the wrap fee, you, the client, must be invested in something and cash does not count, after all, no one is stupid enough to pay a fee for someone to watch their cash!

Do yourself a favor and learn to invest for yourself and by yourself and put the person who cares the most about your money in charge of it - you.

You can start by selling your bonds for a profit now, sit on cash and wait for the bubble to burst and then you can buy your own bonds without the additional fees and commissions when they yielding something more reasonable.

Additionally, if you hold your individual bonds to maturity, the coming increasing interest rates will lower the price of your bond temporarily but you will get your principal back.  If you own bond funds, watch out, not only because the coming redemptions will cause the fund manager to sell bonds early but most bond funds use leverage which will magnify your losses.