They are not safe in the long run. Nor should they be. Most of the worst crimes of imperialism have been committed in the name of securing stable investment opportunities.
Obligatory: Read Palo Alto by Malcolm Harris
That’s quite a silly and naive view. Everyone knows to diversify. You diversify by country and by industry. So when the Japanese market fails, you’re barely affected. And then you throw bonds into the mix and even the global financial crisis is not a problem anymore.
What from what i posted do you find silly or naive?
Everyone knows to diversify.
Diversifying by country wouldnt have done a lot for you in world war eurasia. Correlations go up in market crashes. Systemic risk is a company- or industry-level risk, Systematic risk is the risk inherent to the entire market. Did you even read it or look at graphics?
And then you throw bonds into the mix and even the global financial crisis is not a problem anymore.
Bonds cratered along with stock recently with interest rate increases and inflation destroying trillions of value. Certainly much worse outcomes over the long run than stocks
I did read and look at the graphs. Did you? They do not touch diversification at all. And what they show, is that problems don’t happen across the board simultaneously. If you only invested in Japan, you got broke in 1990-s. If you invested across the world, you just had a small dip in performance, which would’ve been corrected by any descent fund quite quickly by re-allocating the assets.
Bonds don’t play the same game as stocks. Bonds are your trust in the government, not in business. Thus up and down cycles in bond markets are different than these cycles in stock markets. Yes, bonds have lower returns and bonds alone are a bad investment. Everyone knows that. But bonds tend to grow rapidly during financial troubles thus dampening negative effects of stock market failures (because central banks tend to increase rates to combat inflation).
In the end, you should consider your risk tolerance and your time scale. If you have 30+ years and have a high risk tolerance, you can skip bonds. If you have low risk tolerance or your timeline is short, you should look at bond diversification options. And always get an advice from a licensed financial advisor. They tend to know this stuff better than you and they bear legal responsibility.
Bonds don’t play the same game as stocks. Bonds are your trust in the government, not in business. Thus up and down cycles in bond markets are different than these cycles in stock markets.
different but not inversely correlated. Its suboptimal versus true hedge. also see inflation adjusted returns on bonds .
Yes, bonds have lower returns and bonds alone are a bad investment. Everyone knows that. But bonds tend to grow rapidly during financial troubles thus dampening negative effects of stock market failures (because central banks tend to increase rates to combat inflation).
Central banks increasing rates lowers value of prior issued bonds. and bonds growing in financial crisis is just a noncausal correlation thats not a fixed way things work. In the macroeconomic position we are entering it doesn’t make sense . Look at how TLT was down like 30+% during this crash that just happened in stock and bonds .
I understand what you are saying about diversification but it makes no sense to put money in bonds when you can have other hedges that have true mechanistic inverse correlation and bonds are negative real yield. Show me any diversification set up using bonds and i can show you a higher yielding setup that has lower risk.
They tend to know this stuff better than you and they bear legal responsibility
definitely they don’t. Most of those people are idiot parasites stealing from financially illiterate people.
Insightful article, thanks for the link!
