It is our opinion that bond investors will be the next group of investors to get hurt
Provo, UT (Vocus) November 10, 2010
Although bonds have become popular the past two years, Paragon's wealth managers advise investors not to put their money into long-term bonds because Paragon believes investors could be hurt significantly if rates increase.
"It is our opinion that bond investors will be the next group of investors to get hurt," said Dave Young, President and founder of Paragon. "In the 2000 bear market stock investors got crushed. Then, many of those same investors moved to real estate for protection and got beaten up again in 2008. Treasury bonds performed well the entire time. As a result, since the beginning of 2009, investors have put a net $620 billion into bond funds while they have withdrawn $100 billion from stock funds. This has pushed rates to all time lows."
Paragon's financial advisors claim that the current quantitative easing by the Fed may temporarily slow down increasing rates, but it won't stop them.
"Many bonds do not have near enough return to compensate for their downside risk," said Nathan White, Paragon's Chief Investment Officer. "With interest rates so low, we believe that investors will not find the safety or the returns they seek in most bonds."
White said bonds have been in a 30-year bull market, which lulled investors into a false sense of security.
“Going forward, the returns that people will likely see in bonds will be very low at best or sharply negative at worst,” said White. “Unfortunately for bond investors, we believe it could be the negative scenario.”
Paragon’s wealth managers advise investors to be aware of the maturities and quality of their bond holdings. The encourage investors to consider shortening the maturity of their bonds and adding high-quality dividend stocks as an alternative.
About Paragon Wealth Management
Paragon Wealth Management is a wealth management firm that actively manage all types of traditional and retirement accounts such as IRA and 401(k) rollovers, and pensions and trusts. Paragon is a registered investment advisor and has fiduciary responsibility. Paragon received the Best of State Award in Financial Services, was listed on Wealth Manager Magazine's Top Wealth Managers List in the U.S., and was listed on WealthManagerWeb's Top Wealth Manager's list in 2010. Call 800-748-4451 for more information.
Paragon cannot guarantee the accuracy of information from other sources. Opinions are as of the dates indicated only. This report is not a solicitation for any security. Past performance is not a guarantee of future results. Investments in securities involve the risk of loss. Do not rely upon this information to predict future investment performance or market conditions. This information is not a substitute for consultation with a competent financial, legal, or tax advisor and should only be used in conjunction with his/her advice.