Bob Dylan may have famously sung, “You don’t need a weatherman to know which way the wind blows.” Â But if you don’t at least have a barometer, you could easily get blown off course in the interest rate markets!
You see, many investors tell me they find the interest rate markets more complex and confounding than the stock market. If you love the Apple (AAPL) iPhone, you can buy a couple shares of Apple stock. Every common share is the same as another. If the stock goes up, you sell your shares for a higher price, and you walk away happy.
But what if you decide you want to buy, say, General Motors (GM) bonds? Where do you start? A single large corporation like GM can have several – even DOZENS – of different bonds outstanding. Those bonds can have fixed or variable interest rates … maturity dates a year or ten years down the road … call features … and other characteristics that muddy the waters.
What’s more, some bonds rarely change hands – or do so with much wider bid-ask spreads than you’re used to when you trade stocks. If you try to buy a single bond or two on your own, or through a broker, you could get fleeced!
You can find hundreds of bond mutual funds or Exchange Traded Funds that make it easier to own bonds, of course. But do you know which funds make the most sense in a rising interest rate environment? Or which could leave you sitting on losses of 10%, 20%, or more? Do you know which bond ETFs are attractive in a shrinking economy … or a growing one?
And what about currencies? Did you know that a modest change in the value of the U.S. dollar against the Japanese yen … or Australian dollar … or euro … can hammer certain bonds and bond funds … while having little to no impact on others?
Don’t even get me started on the Federal Reserve, either! The Fed can be your best friend … or your worst enemy … as a bond investor. If you don’t have an interest rate barometer to show which way the wind is blowing in Washington, you could lose big money – fast – even in supposedly safe Treasury bonds!
That’s where I can help, and where my course comes in “How to Profit from Rising Interest Rates.”
Until next time,
Mike
