David Kirkpatrick

June 8, 2010

Looking for the next financial bubble

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 5:50 pm

As far as investment instruments go, bonds aren’t very sexy, but the bond market is shaping up to be the next major financial bubble. Food for thought for anyone currently rethinking investment strategies.

From the link;

Don’t let the lack of fanfare fool you. A projected $380 billion will pour into bond funds this year, more than went into domestic stock funds in the past decade. That’s on top of a record $376 billion last year.

“The bond market is a bubble,” says Robert Froehlich, senior managing director of the Hartford Financial Services Group. “And it’s getting ready to burst.” One major reason: Despite the recent rally in treasury bond prices and slide in yields — due to fears over the European debt crisis — the long-term direction for interest rates is headed higher.

Like all financial manias, this one is being fueled by a combination of fear and greed.

James Stack, a market historian and president of InvesTech Research, notes that many baby boomers who have stampeded into bond funds did so in reaction to their stock losses since the financial crisis began in 2008.

October 23, 2009

Some thoughts on retirement investing

Retirement planning is an ongoing process, and you really can’t count on Social Security to take care of all your retirement income needs. This means a major part of any retirement income plan is retirement investing.

Retirement investing is a different animal from other financial investments. Saving money for retirement isn’t enough because inflation is going to erode the future value of your savings, and wild speculation is not the investment answer because it’s simply too risky. For retirement investing you want a return that keeps you ahead of inflation and does some work in building your nest egg, along with exposing your investment to low or moderate risk. As you get older you want to invest in less and less risky vehicles to protect your retirement fund.

Here are some retirement investment options:

  • Stocks — over the long term stocks have historically performed better than savings accounts or bonds.
  • Bonds — you are more likely to get your investment back with bonds compare to stocks.
  • Annuities — provide a monthly income stream after a lump-sum investment.
  • Mutual Funds — pool many investors and invest that money through an investment strategy devised by the fund manager
  • Investment Partnerships and Hedge Funds — private investment partnerships and hedge funds are an alternative to mutual funds with a few significant differences including participating in a much wider assortment of investment vehicles and borrowing money for additional investment. Investment partnerships and hedge funds are riskier investments and typically require a sizable minimum investment to participate.
  • Exchange-traded Funds — ETFs are another alternative to mutual funds and hold large “baskets” off well-defined slices of the investment universe. Two ETF advantages over mutual funds are low expenses and very high liquidity.
  • Commodities — investing in commodities is investing the raw materials — metals, petroleum, agriculture, etc. — that go into production and consumption. Commodities trading is also a risky investment strategy.