Business Marketing Magazine Summer 2017 January 2016 Creating Clear Businesses

Investment EF Moody How to Make a Killing with Bonds and Target Date Funds in 2016 35 O.K. I lied. But at least I got your attention to review what I believe to be very risky allocations. You need to look at the graph to make my points clear. In less than one minute you will understand how bond funds change in value. You will become incredibly impressive at social functions with friends, neighbors, large plants. American consumers rarely grasp this fundamental. Assume you bought a bond at point A for $1,000. The yield on the bond is 5%. Several years later you want to sell at point B where current rates are 15%. Buyers would pay you less than $1,000 (discount) simply because your bond’s yield is lower. Now assume you bought a bond at point B yieldwww.businessmarketingmag.com ing 15%. You then want to sell it at point C where the current bonds are earning far less- say 3%. You would be paid more than $1,000 (premium) due to your higher interest rate. Bet you understood that. Don’t ever forget it since you may be going through it several times in your lifetime. But the reality is that line A/B will apply for many years since rates had been intentionally driven down to nothing by Bernanke when the FED flooded America with money (Quantitative Easing}. Trillions of dollars to help stem the greed and idiocy of corporate America (and Americans) that resulted in the Great Recession. But rates can only go to zero. (Another lie- some countries offer negative rates. Prevalent in Europe). However when the floor is finall H

Business Marketing Magazine Summer 2017 January 2016 Creating Clear Businesses | Page 38