The link for my online course "Everything You Need To Know About Bond Funds" is here pensioncraft.com/register/investment-for-absolute-beginners/how-to-choose-a-bond-fund/ The link to membership of PensionCraft on Patreon is here patreon.com/pensioncraft
Crystal clear as always. So high yield bonds are closely correlated with equities, especially in crisis. What is then the case for adding them to the crisis basket? Having an asset with a less volatile price than equities right?
I agree, this was a good explanation but I too am still not sure about any type of bonds for the same reasons as you've given. Gold too can stay depressed for many years, so seems like a poor choice. Seems like you're just as well investing in good quality companies which will tend to fall less than the market as a whole in a crash
Thank you, Ramin. Another great video. When I saw the title I thought, "High Yield doesn't seem like a good idea right now". Glad to see you tee it up for the next crisis.
Hi @Sukerkin I know it's surprising given their equity performance. But they are sailing pretty close to the wind with lots of debt and profit that, for a while at least, didn't look like it could sustainably match their debt servicing costs. Now they're profitable I guess their credit rating may improve. Thanks, Ramin.
I’m struggling to comprehend… what Vanguard portfolio are you suggesting to add to my crisis basket if, as Michael Burry suggests, the ‘Mother of all Crashes’ is coming? Forewarned is forearmed. Thanks.
I've been looking at Inflation-linked Gilts. I came across this statement which makes no sense to me and seems to completely contradict what ILGs are for, what they do and how the work! Am I misunderstanding or is this comment incorrect? "“If inflation in the UK rises, the income from the ILG will increase, but it is totally secondary to the fact that if interest rates rise at the same time, a 1 per cent rise in rates could result in a 23 per cent fall in the capital value of the bonds. You would get a 1 per cent higher yield, but you probably wouldn’t feel very happy about that,” says Rory McPherson, chief investment strategist at Psigma Investment Management." I thought that interest rate rises were bad (in the way described above) for regular bonds but precisely the opposite for ILGs which is the whole point of them?
Floaters. Interesting... seems a bit niche though, but a nice example of how you can slice and dice risks in fixed income (almost no interest rate risk, pure credit risk). Thanks for the suggestion Mark. Ramin.
Hi @GrayGhosting yes the returns incorporate losses due to default because some of the bonds in the fund default over time and these reduce the capital of the fund. So what you see is the total return with income reinvested and adjusted for inflation i.e. a total real return. Thanks, Ramin.
Hi Ramin. Nice video as always. Could you maybe do in the future also video about the differences between investing in bond basket etfs, which in my view don't have a fixed runtime themselfs, and single bonds with fixed maturity dates. What does investing in ether one of them mean to coupon, valuation, return of time, ...?
U.K. gilts please and how you buy. I am a novice and do not know how to purchase U.K. gilts. Are these the same as government bonds, just paying a rediculously low interest rate at the moment.
Hi @@Applepie409 UK Government Bonds are called gilts as you say. There are lots of gilt funds that you can buy e.g. here's a list from JustETF www.justetf.com/uk/find-etf.html?assetClass=class-bonds&groupField=none&country=GB&bondType=Government&sortField=ter&sortOrder=asc The shorter the duration the lower the price fluctuations and the more cash-like the bond fund becomes (lower return, lower risk). Very long duration gilt funds are almost as volatile as equity markets. My bond course explains all of this and talks through some example funds to help you understand what you're buying. There's a link to the "Everything You Need To Know About Bond Funds" in the description of this video. Thanks, Ramin.
so i am getting around 3.89% from short term treasuries with about 36% of my funds. If i want to move some of that back into stocks what is a good criteria to determine when i should move it? Any ideas?
Hi @Paul H long-term equity on average outperforms bonds by around 4% per year. That means that if you're putting money aside for a long period of time then the default investment would be equity. Valuation certainly matters i.e. you get better returns if you invest when equity is cheap and at the moment (October 3rd 2022) US equity is roughly at fair value if you look at forward P/E. Some people compare earnings yield (earnings over price) compared with Treasury yields to see the relative attractiveness of equity and government bonds i.e. if you can earn 4% risk-free with government bonds then if your guess is that equity is giving much less than that (compared with equity total return = capital gain + dividend income) it is relatively unattractive. Timing is generally difficult though so it's best to use simple investment strategies that don't assume you can time entry into equity markets. Thanks, Ramin.
Another way to look at corp bonds is how companies raise capital for projects. Either by issung shares, issuing bonds or receiving a government subsidy. Issuing bonds reduces the number of new shares issued. Issuing shares reduces the number of new bonds. Government subsidies reduce issuance of shares and bonds.
Excellent video, Ramin. Please could you make a video on the factors that younger investors should be mindful of as opposed to older investors - e.g. should a younger investor looking to get on to the property ladder or to upgrade their home or move into a larger home or pay for private school fees etc. allocate in equity only or in something like a golden butterfly or in a 2 fund portfolio
quick question - do the Ratings Agencies have access to privileged information about the companies they rate, or do they only have the same information that is available to the general public?
Rating agencies are engaged by the companies that want to get their debt rated. As part of that engagement, the agencies get a whole lot of due diligence including financial models, information about the debt stack, projections etc. This diligence is then assessed by the agencies against their "ratings criteria". This information is definitely not in the public domain. In fact the agencies rate debt of companies who don't have listed equity as well - very little information about such companies is in the public domain. Whilst the agencies definitely have more information, they may not always get it right. For example during the 2008 credit crunch, a whole lot of defaulted debt was highly rated
the coupons don’t even keep up with inflation so you can’t really look at it as income, it’s just trying to mitigate some of the erosion of your capital 😢
Enjoy your work, my friend. Very educational. But I must differ with you in that those bond funds that you recommend have many many names in them, many of who you would not want to own. Sometimes they even hold cash! Then add in the load that you must pay and for me, single high yields are the better choice. As for default, GM, Dish, and QVC are just a few names that as I write have nice yields. Though not graded as high as MSFT and JNJ, I don't think those companies are going anywhere and defaults are unlikely. Thanks
This video was quite interesting! Love to share how I've been able to understand the cryptocurrency market I signed up for cryptlogger using the referral link I found and I got a bonus. I did get the CMM for free also, so that's nice. Definitely a bit delighted though.
All I see is people into high risk (which I refer to as betting the farm) my brother sold his house he had $225,000 cash from the sale he was going to buy Bitcoin when it was around $61,000 he was looking to make real fast cash he said he heard sources saying Bitcoin was going to $100,000 that would give him $160,000 return on his $225,000 the family begged him to NOT get into Bitcoin he did not buy any thank goodness he would have lost half of is $225.000 he instead put the money down on another house closer to his job
![เปิด อาณาจักร หมื่นล้าน "สาระตั้ม" l [Nickynachat]](http://i.ytimg.com/vi/3XE0nPF4YkQ/mqdefault.jpg)
The link for my online course "Everything You Need To Know About Bond Funds" is here pensioncraft.com/register/investment-for-absolute-beginners/how-to-choose-a-bond-fund/
The link to membership of PensionCraft on Patreon is here patreon.com/pensioncraft
Great work Man, Your video are always helpful..i am a fan and i must say keep doing what you do! Love it
I appreciate that!
Thanks for stressing ETFs over indiv bonds, investors often don´t realize that the risk is not just varying returns, but rather their entire capital.
I got a lot out of this...bonds are an under appreciated topic in many venues.
Thank you @Thomas Crew - I am glad you are enjoying the videos
Relevant info right now, high yield bond funds seem to be doing quite well now.
This is a fantastic professional education-level content, thank you so much Ramin! ❤
My pleasure! @Ann Roberts
Perfect video, excellent presentation
Thanks from Minnesota,USA
You betcha Ebrahim! Thanks, Ramin.
Very well made video and easy to understand. Thanks
Glad it was helpful! @ronjr831
Crystal clear as always. So high yield bonds are closely correlated with equities, especially in crisis. What is then the case for adding them to the crisis basket? Having an asset with a less volatile price than equities right?
I agree, this was a good explanation but I too am still not sure about any type of bonds for the same reasons as you've given. Gold too can stay depressed for many years, so seems like a poor choice. Seems like you're just as well investing in good quality companies which will tend to fall less than the market as a whole in a crash
Thank you, Ramin. Another great video. When I saw the title I thought, "High Yield doesn't seem like a good idea right now". Glad to see you tee it up for the next crisis.
Thanks Frank, it's on my Crisis Shopping List! Thanks, Ramin.
Thanks for the video! As always the explanations are very clear
Glad it was helpful!
My face was a picture when it was boldly stated that TESLA is a junk bond! Whaaat?! :)
Hi @Sukerkin I know it's surprising given their equity performance. But they are sailing pretty close to the wind with lots of debt and profit that, for a while at least, didn't look like it could sustainably match their debt servicing costs. Now they're profitable I guess their credit rating may improve. Thanks, Ramin.
Thank you!
You're welcome!
I’m struggling to comprehend… what Vanguard portfolio are you suggesting to add to my crisis basket if, as Michael Burry suggests, the ‘Mother of all Crashes’ is coming? Forewarned is forearmed. Thanks.
This is another very helpful video! Thanks 👍
Glad it was helpful!
Can we get an update on the investment climate for high yield bonds?
I've been looking at Inflation-linked Gilts. I came across this statement which makes no sense to me and seems to completely contradict what ILGs are for, what they do and how the work! Am I misunderstanding or is this comment incorrect?
"“If inflation in the UK rises, the income from the ILG will increase, but it is totally secondary to the fact that if interest rates rise at the same time, a 1 per cent rise in rates could result in a 23 per cent fall in the capital value of the bonds. You would get a 1 per cent higher yield, but you probably wouldn’t feel very happy about that,” says Rory McPherson, chief investment strategist at Psigma Investment Management."
I thought that interest rate rises were bad (in the way described above) for regular bonds but precisely the opposite for ILGs which is the whole point of them?
I'd love to see a similar analysis of Senior Variable Rate Debt ETF's (such as BKLN).
Floaters. Interesting... seems a bit niche though, but a nice example of how you can slice and dice risks in fixed income (almost no interest rate risk, pure credit risk). Thanks for the suggestion Mark. Ramin.
Well done. Question: do those graphs of junk bond total returns include the defaults in the cacluation?
Hi @GrayGhosting yes the returns incorporate losses due to default because some of the bonds in the fund default over time and these reduce the capital of the fund. So what you see is the total return with income reinvested and adjusted for inflation i.e. a total real return. Thanks, Ramin.
Does the same analysis hold true for high yield municipal bonds?
Great video! Thank you.
Glad you liked it!
Brilliant. Thank you.
You're very welcome!
I need to decide on a global bond fund. Which are considered the best? Or, would just a good quality government bond fund suffice?
Thank you for the great video. What are your thoughts on the current high yield etf?
Wow, this video makes investments so easy to understand.
I'm so glad you found it helpful
Hi Ramin. Nice video as always. Could you maybe do in the future also video about the differences between investing in bond basket etfs, which in my view don't have a fixed runtime themselfs, and single bonds with fixed maturity dates. What does investing in ether one of them mean to coupon, valuation, return of time, ...?
Noted and thank you for taking the time to comment
Right now it makes more sense to buy an ETF like Schp or Vtip?
I like this vid. Good insight.
Thank you
If I’m 58 years old and well diversified with my assets. Am I too old for corporate bond, ETFs to buy and hold?
It makes me wonder!! why do buyers purchase TLT when the dividend at the current price is one percent less than the 20 yr treasury.
That was a banger of a video. Loved it
Thank you - I am glad you are enjoying the videos - thank you for commenting
VEMT EM Gov bond pays about 4%.. safer than junk bonds?
was the first chart adjusted for inflation??
would you say BSV and SHY can replace cash bank accounts??? thanks
I would love to see this same analysis applied to long dated US Government bonds and UK Gilts
Thank you for sharing your views
U.K. gilts please and how you buy. I am a novice and do not know how to purchase U.K. gilts. Are these the same as government bonds, just paying a rediculously low interest rate at the moment.
Hi @@Applepie409 UK Government Bonds are called gilts as you say. There are lots of gilt funds that you can buy e.g. here's a list from JustETF www.justetf.com/uk/find-etf.html?assetClass=class-bonds&groupField=none&country=GB&bondType=Government&sortField=ter&sortOrder=asc The shorter the duration the lower the price fluctuations and the more cash-like the bond fund becomes (lower return, lower risk). Very long duration gilt funds are almost as volatile as equity markets. My bond course explains all of this and talks through some example funds to help you understand what you're buying. There's a link to the "Everything You Need To Know About Bond Funds" in the description of this video. Thanks, Ramin.
Hello Sir, Could you please tell me why the " ! Shares 1-3 Year Treasury Bond ETF" given the name of 1 to 3 year?
Great video - thanks a lot :-)
Glad you liked it!
so i am getting around 3.89% from short term treasuries with about 36% of my funds. If i want to move some of that back into stocks what is a good criteria to determine when i should move it? Any ideas?
Hi @Paul H long-term equity on average outperforms bonds by around 4% per year. That means that if you're putting money aside for a long period of time then the default investment would be equity. Valuation certainly matters i.e. you get better returns if you invest when equity is cheap and at the moment (October 3rd 2022) US equity is roughly at fair value if you look at forward P/E. Some people compare earnings yield (earnings over price) compared with Treasury yields to see the relative attractiveness of equity and government bonds i.e. if you can earn 4% risk-free with government bonds then if your guess is that equity is giving much less than that (compared with equity total return = capital gain + dividend income) it is relatively unattractive. Timing is generally difficult though so it's best to use simple investment strategies that don't assume you can time entry into equity markets. Thanks, Ramin.
LQD seems to highly correlated with SPY during the last year :/
Another way to look at corp bonds is how companies raise capital for projects. Either by issung shares, issuing bonds or receiving a government subsidy. Issuing bonds reduces the number of new shares issued. Issuing shares reduces the number of new bonds. Government subsidies reduce issuance of shares and bonds.
Excellent video, Ramin. Please could you make a video on the factors that younger investors should be mindful of as opposed to older investors - e.g. should a younger investor looking to get on to the property ladder or to upgrade their home or move into a larger home or pay for private school fees etc. allocate in equity only or in something like a golden butterfly or in a 2 fund portfolio
quick question - do the Ratings Agencies have access to privileged information about the companies they rate, or do they only have the same information that is available to the general public?
Rating agencies are engaged by the companies that want to get their debt rated. As part of that engagement, the agencies get a whole lot of due diligence including financial models, information about the debt stack, projections etc. This diligence is then assessed by the agencies against their "ratings criteria". This information is definitely not in the public domain. In fact the agencies rate debt of companies who don't have listed equity as well - very little information about such companies is in the public domain.
Whilst the agencies definitely have more information, they may not always get it right. For example during the 2008 credit crunch, a whole lot of defaulted debt was highly rated
@@addukaddu1 Thanks for the reply!
the coupons don’t even keep up with inflation so you can’t really look at it as income, it’s just trying to mitigate some of the erosion of your capital 😢
Enjoy your work, my friend. Very educational. But I must differ with you in that those bond funds that you recommend have many many names in them, many of who you would not want to own. Sometimes they even hold cash! Then add in the load that you must pay and for me, single high yields are the better choice. As for default, GM, Dish, and QVC are just a few names that as I write have nice yields. Though not graded as high as MSFT and JNJ, I don't think those companies are going anywhere and defaults are unlikely. Thanks
Don't mind me, I'm just leaving a cookie here for the algorithm to feed on.
Hi Clément thank you for that 8-). Ramin.
So… stick with stocks for a higher return and ride out the downturns…
Despite all the economy crisis, this is still a good time to start up your investment
Does anybody have an opinion about 'Global Emerging Markets Government Bond Local Currency'?
Doesn't buying during crash make them more expensive?
This video was quite interesting! Love to share how I've been able to understand the cryptocurrency market I signed up for cryptlogger using the referral link I found and I got a bonus. I did get the CMM for free also, so that's nice. Definitely a bit delighted though.
All I see is people into high risk (which I refer to as betting the farm) my brother sold his house he had $225,000 cash from the sale he was going to buy Bitcoin when it was around $61,000 he was looking to make real fast cash he said he heard sources saying Bitcoin was going to $100,000 that would give him $160,000 return on his $225,000 the family begged him to NOT get into Bitcoin he did not buy any thank goodness he would have lost half of is $225.000 he instead put the money down on another house closer to his job
@Pension Craft ffs now the scammers are impersonating Ramin
No mention of captial growth strategy
This video is about income from bonds. Your capital doesn't grow with bonds.
@@tc9634 would you say BSV and SHY would replace cash in bank accounts??? thanks
Analysis paralysis 😴