Why Your Financial Guy Loves Selling Bonds

Don't get me wrong, bonds are a good investment and should be a part of most portfolios but there is a dirty little secret about bonds that investors do not know.

Your financial guy loves selling you bonds, why?

Because there is a hidden commission in bonds that you do not see.  It is called a concession and on every bond bought or sold, your financial guy gets paid but you don't see how much!

That is gold for a stockbroker, financial advisor, wealth manager, financial planner, whatever they want to be called today, because it doesn't appear to be churning.  

Recently, with interest rates decreasing which means prices increase on anything fixed (like a bond), you can be sure that your financial guy will be all to happy to sell your bond (that you bought only months ago) for a small profit for you AND A LARGE CONCESSION FOR HIM.

Ever wonder why you buy and sell bonds?  Now you know!

Ever wonder why brokerage firms earnings reports are filled with great news from bonds / fixed income?  Now you know!

PS.  Bonds may not necessarily be a good investment in 2013 and beyond since interest rates are likely to go sideways or higher which means anything fixed, like a bond, will decrease in value.

Just 11% Of Hedge Funds Beating S&P500

As you know from my blogs including this one and many books, I am not a fan of hedge funds.  To recap - you give trading authorization to someone so that they can gamble with your money.  If they win, they get 20% of the gains.  Wow.

According to Goldman's research to date, just 11% of hedge funds have beat the simple S&P 500.

To date, the S&P 500 is up just about 12% and the average hedge fund is up 4.6%.  I am not sure if that includes their hefty 20% fee for managing your money so wisely :(

To make matters worse, 20% of hedge funds are negative for the year and these are the geniuses that many pension funds trust their money to invest and do well.

Lastly their two biggest holdings are Google and Apple, while that's good, they are both winners, it's most likely they recently bought them and are not and have not been long term holders which doesn't bode well.