{"id":31073,"date":"2021-10-29T10:38:59","date_gmt":"2021-10-29T10:38:59","guid":{"rendered":"https:\/\/adamfayed.com\/?p=31073"},"modified":"2024-05-16T07:41:19","modified_gmt":"2024-05-16T07:41:19","slug":"is-investing-in-bonds-worth-it","status":"publish","type":"post","link":"https:\/\/adamfayed.com\/es\/investment-options\/is-investing-in-bonds-worth-it\/","title":{"rendered":"Is investing in bonds worth it?"},"content":{"rendered":"<p>Understand the pros and cons of investing in bonds and consider them as part of your <a href=\"https:\/\/adamfayed.com\/es\/investment-options\/\" data-type=\"link\" data-id=\"https:\/\/adamfayed.com\/investment-options\/\">inversi\u00f3n alternativa<\/a> options.<br><br>Escribo a menudo en Quora.com, donde soy el escritor m\u00e1s visto sobre temas financieros, con m\u00e1s de 422,4 millones de visitas en los \u00faltimos a\u00f1os.<\/p>\n\n\n\n<p><strong><br>En las respuestas que figuran a continuaci\u00f3n me he centrado en los siguientes temas y cuestiones<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Is investing in government bonds still worth it? Bonds are uncorrelated to stock markets, but no longer pay as much as they historically did.  I therefore look at the positives and negatives associated with traditional portfolio construction, which emphasises the need to use bonds.  <\/li>\n\n\n\n<li>Do US stock markets always beat international ones?  This is an interesting question as it comes at a time when US stock markets have outperformed for a long period of time. Will it last?<\/li>\n\n\n\n<li>Tesla&#8217;s stock has been soaring in recent days.  Will Elon Musk become the world&#8217;s first trillionaire? <\/li>\n\n\n\n<li>Why do many footballers go broke, despite earning loads of money? <\/li>\n<\/ul>\n\n\n\n<p>Es posible que algunos de los enlaces y v\u00eddeos que aparecen en las respuestas originales no se muestren aqu\u00ed y, si es as\u00ed, tendr\u00e1s que consultar las respuestas originales para verlos.<\/p>\n\n\n\n<p id=\"block-e2e023b0-32d6-4d32-81ea-537377515d9f\">Si quieres que responda a alguna pregunta en Quora o YouTube, o est\u00e1s buscando invertir, no dudes en<a href=\"https:\/\/adamfayed.com\/es\/#contact-me\">&nbsp;p\u00f3ngase en contacto conmigo<\/a>, correo electr\u00f3nico (advice@adamfayed.com) o utiliza la funci\u00f3n de WhatsApp que aparece a continuaci\u00f3n.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"is-investing-in-bonds-worth-it\"><strong>Is investing in bonds worth it?<\/strong><\/h4>\n\n\n\n<p><a href=\"https:\/\/www.quora.com\/Is-investing-in-bonds-worth-it\" target=\"_blank\" rel=\"noreferrer noopener nofollow\"><strong>Fuente: Quora<\/strong><\/a><\/p>\n\n\n\n<p>It depends what you mean by bonds, but for the purposes of this question I will assume you mean government bonds.<\/p>\n\n\n\n<p>I have partly changed my mind on this question in recent times. Don\u2019t get me wrong, government bonds still have the following benefits:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>They aren\u2019t correlated with stock markets<\/li>\n\n\n\n<li>The short-term ones still often go up when markets fall, like in 2008\u20132009. Even during the Covid falls, short-term bonds did relatively OK.\u00a0<\/li>\n\n\n\n<li>Just because bonds aren\u2019t performing well now, doesn\u2019t mean they won\u2019t always perform badly. The \u201cdeath of bonds\u201d has been called many times in history. We shouldn\u2019t judge assets purely on what they are producing today.<\/li>\n\n\n\n<li>For people who struggle with huge volatility, bonds still help mitigate the more extreme falls. If you are 60% in stocks and 40% in bonds, your portfolio won\u2019t fall as far during the bad times, but it also won\u2019t soar as much in the good times. Experienced investors learn to not fear volatility though.<\/li>\n\n\n\n<li>They still have a decent place in a portfolio for people close to retire and are in the preservation phase.<\/li>\n\n\n\n<li>A small amount, say a 10% allocation, can still make sense for younger people.<\/li>\n<\/ul>\n\n\n\n<p>Yet the good quality bonds do pay very little now. What\u2019s more, stock markets (not individual stocks but the whole market) have always beaten bonds long-term:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/qph.fs.quoracdn.net\/main-qimg-521609bfac919cc0a6279987c0a5a696\" alt=\"\"><\/figure>\n\n\n\n<p>That meant that it always made sense for younger investors to be light on bonds and heavy in stocks, before going for a 60\/40 or 50\/50 allocation when they are older.<\/p>\n\n\n\n<p>There was no point in taking risks on alternative, uncorrelated, assets, when bonds could pay 6% per year.<\/p>\n\n\n\n<p>What has changed now is that it is fairly easy to beat government bonds with alternative assets &#8211; which can include good-quality corporate bonds.<\/p>\n\n\n\n<p>Especially for people who are more sophisticated, or have access to an advisor, have many smaller alternative investments to partially replace the bond allocation, can increase returns.<\/p>\n\n\n\n<p>Of course, the key is increasing your risk-adjusted return, and not just return, and that takes some thought, skill, research etc.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"will-the-us-stock-markets-always-outperform-the-foreign-market\"><strong>Will the US stock markets always outperform the foreign market?<\/strong><\/h4>\n\n\n\n<p><a href=\"https:\/\/www.quora.com\/Will-the-US-stock-markets-always-outperform-the-foreign-market\/answer\/Adam-Fayed\" rel=\"nofollow noopener\" target=\"_blank\"><strong>Source Quora: <\/strong><\/a><\/p>\n\n\n\n<p>I was reading an interesting research paper a few days ago. It spoke about how Canadian investors have behaved in the last few decades.<\/p>\n\n\n\n<p>From 1999\u20132000 until the Global Financial Crisis of 2008, Canadian stocks thrashed their US counterparts.<\/p>\n\n\n\n<p>Emerging markets sometimes did even better. Look at how the Shanghai Composite performed. &#8211; going from 1,000 to over 6,000 in a short space of time!<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/qph.fs.quoracdn.net\/main-qimg-9edd0f3c6c9c6f0e944908bce6a37837\" alt=\"\"><\/figure>\n\n\n\n<p>During this time, the number of Canadian investors who put 100% of their assets into local stocks skyrocketed, as did the number focusing on emerging markets.<\/p>\n\n\n\n<p>However, this happened after 2008:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/qph.fs.quoracdn.net\/main-qimg-2e2f87e04ca7164971b5e83069d0a361\" alt=\"\"><\/figure>\n\n\n\n<p>US stocks have beaten Canadian ones hands down, and that has continued between 2018 and today.<\/p>\n\n\n\n<p>Now, many Canadian investors are wondering whether they should not invest in local stocks.<\/p>\n\n\n\n<p>I use Canadian investors merely as an example. Similar studies have been done on investors globally.<\/p>\n\n\n\n<p>I am from the UK and see much the same thing. I personally saw people getting into oil and emerging market ETFs and stocks before 2008, and fewer British people wanting local stocks due to the recent performance of the FTSE100 (and even the FTSE250 hasn\u2019t done as well as the Nasdaq and some US indexes).<\/p>\n\n\n\n<p>However, that won&#8217;t last forever. It is true that the US markets are some of the best, if not the best, in the world, because they attract innovation from around the world.<\/p>\n\n\n\n<p>Look at all the European, Japanese, and Chinese firms that IPO on the exchanges.<\/p>\n\n\n\n<p>Apple, Amazon, Starbucks and so on also sell more internationally than in the US.<\/p>\n\n\n\n<p>That doesn\u2019t mean, however, that US markets will always outperform. They haven\u2019t beaten international stocks in every single time period historically:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/qph.fs.quoracdn.net\/main-qimg-4ce11da67549736097bbf9cca21815df\" alt=\"\"><\/figure>\n\n\n\n<p>What is true is that US stocks have beaten international ones over most 40\u201350 year time horizons, but there can be significant periods of time when international wins.<\/p>\n\n\n\n<p>As US stocks have been outperforming for so long, it could be the turn of international stocks to do better.<\/p>\n\n\n\n<p>We already saw that last year. With the exception of the Nasdaq, the other indexes that performed best were previously underperforming exchanges like Taiwan and South Korea.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"after-reclaiming-his-title-as-the-world-s-richest-person-do-you-anticipate-that-elon-musk-s-wealth-will-continue-to-increase-throughout-the-next-five-years\"><strong>After reclaiming his title as the world&#8217;s richest person, do you anticipate that Elon Musk&#8217;s wealth will continue to increase throughout the next five years?<\/strong><\/h4>\n\n\n\n<p><a href=\"https:\/\/www.quora.com\/After-reclaiming-his-title-as-the-worlds-richest-person-do-you-anticipate-that-Elon-Musks-wealth-will-continue-to-increase-throughout-the-next-five-years\/answer\/Adam-Fayed\" rel=\"nofollow noopener\" target=\"_blank\">Fuente: Quora <\/a><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/qph.fs.quoracdn.net\/main-qimg-135833d12d2d2461d786e2c56da03079-lq\" alt=\"\"><\/figure>\n\n\n\n<p>There is a reasonable chance, and indeed there is speculation that he could become the world\u2019s first trillionaire.<\/p>\n\n\n\n<p>However, that doesn\u2019t mean he is the richest person in the world. It merely means he is the wealthiest.<\/p>\n\n\n\n<p>It depends how you define richest really, but I would make a number of points:<\/p>\n\n\n\n<p><strong>1. Unrealized capital gains aren\u2019t the same as realized gains.<\/strong>&nbsp;The media often say that such and such has \u201clost\u201d or \u201cmade\u201d X and Y amounts of money.<\/p>\n\n\n\n<p>That is misleading. What it merely means is that the stock price is fluctuating. If Tesla increases by 10% today, Musk hasn\u2019t made $25 billion in a day.<\/p>\n\n\n\n<p>Likewise, he won\u2019t lose 20 billion when Tesla falls by 10% one of these days. It only becomes a gain or a loss once there are sales.<\/p>\n\n\n\n<p>This isn\u2019t just the case with large sums of money. If your income is 50k, whilst your pension asset soar by 20k and your house goes up by 60k this year, your income remains 50k\u2026..not 130k.<\/p>\n\n\n\n<p><strong>2. The security of the money<\/strong><\/p>\n\n\n\n<p>There are four types of super-wealthy people<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Those with private companies. Like Trump, and most wealthy people at one stage or another. These are the most difficult assets to value because they aren\u2019t liquid, and finding a buyer is difficult.<\/li>\n\n\n\n<li>Those with public companies (listed on the stock market). These people have most of their wealth tied to one or two stocks, like Bezos and Amazon or Musk.<\/li>\n\n\n\n<li>People who gradually moved away from their original business. Bill Gates\u2019 wealth is only partially dependent on Microsoft shares now &#8211; it is about 25% of his portfolio. He would have been wealthier today had he kept 100% in Microsoft, but he wanted to diversify, and now has a team managing his investments<\/li>\n\n\n\n<li>Rulers of countries, like MBS in Saudi Arabia<\/li>\n<\/ol>\n\n\n\n<p>So, even though on paper somebody like MBS isn\u2019t as \u201crich\u201d as Musk, he is indirectly richer.<\/p>\n\n\n\n<p>He has more liquid income and a whole country behind him. Even Gates and Buffett are indirectly in a stronger position than somebody like Musk or Bezos, as they have diversified away from one or two companies.<\/p>\n\n\n\n<p>What would need to happen for somebody like MBS to go broke? The whole country would need to go down, and maybe the world economy, considering he probably has money in many countries.<\/p>\n\n\n\n<p>For Gates and Buffett, it would take a lot for their wealth to fall by 99%. That isn\u2019t the case with a founder who has one or two successful businesses, and most of their wealth is linked to that stock.<\/p>\n\n\n\n<p>That doesn\u2019t mean somebody like Musk will suddenly become 99% poorer, but it does mean he is more vulnerable than somebody who has a more diversified portfolio, to unexpected black swan risks.<\/p>\n\n\n\n<p>The point is, the media put out a lot of misleading statistics on this.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"why-are-most-professional-football-players-broke-after-leaving-the-game\"><strong>Why are most professional football players broke after leaving the game?<\/strong><\/h4>\n\n\n\n<p><a href=\"\/es\/Quora\/\" rel=\"nofollow\">Fuente: Quora <\/a><\/p>\n\n\n\n<p>I watched a great documentary yesterday from the former Arsenal player Paul Merson.<\/p>\n\n\n\n<p>He lost 7 million Pounds, which is about 12\u201315 million in today\u2019s money &#8211; about $20million.<\/p>\n\n\n\n<p>That is about twenty million USD in today\u2019s money. He mentions how gambling ruined him and many other players.<\/p>\n\n\n\n<p>Gambling often goes together with other vices such as excessive alcohol use, and can indirectly result in divorce.<\/p>\n\n\n\n<p>One of the reasons why people who are earning a lot of money gamble is that there always seems to be fresh money coming in.<\/p>\n\n\n\n<p>Until there isn\u2019t. Professional sports stars tend to earn much less in retirement unless they have a big personal brand or go into management.<\/p>\n\n\n\n<p>That, therefore, means that <a class=\"wpil_keyword_link\" href=\"https:\/\/adamfayed.com\/es\/financial-planning\/personal-financial-planning\/\" title=\"planificaci\u00f3n financiera\" data-wpil-keyword-link=\"linked\" data-wpil-monitor-id=\"725\">planificaci\u00f3n financiera<\/a> is very important. If somebody\u2019s peak earnings are in their 20s and early 30s, planning is essential to make the money last.<\/p>\n\n\n\n<p>Even somebody who was relatively frugal might struggle. Let\u2019s say somebody who has a net worth of $10million on the day they retire.<\/p>\n\n\n\n<p>Realistically, they might be able to get a **safe** income of 400k-500k a year from that.<\/p>\n\n\n\n<p>Very good for most people. Hard to get used to if you got used to tens of millions.<\/p>\n\n\n\n<p>That is one of the biggest reasons why many sports stars, not just footballers, go broke.<\/p>\n\n\n\n<p>A study showed that as many as 78% of former basketball players also become broke, with plenty of boxers like Joe Frazier and Mike Tyson going the same way.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"other-reasons-are\"><strong>Other reasons are<\/strong><\/h4>\n\n\n\n<p>1. Hangers on. When young people earn a lot of money, they attract the wrong type of people. At a younger age, it is harder for people to judge people as well. People who gradually get wealthier as they age are less likely to make silly decisions.<\/p>\n\n\n\n<p>2. Lack of professional advice. This is changing. Clubs now set up advice, just as the lottery started to do once they saw the problems.<\/p>\n\n\n\n<p>3. One extreme to the other. Many players come from tough, poverty-stricken, backgrounds, and then suddenly make tens of millions.<\/p>\n\n\n\n<p>4. Unexpected events, like early injuries, and not preparing for them financially.<\/p>\n\n\n\n<p>5. Peer pressure. If everybody else is overspending, it is difficult not to be taken in, even subconsciously. You get invited to events and other occasions. Even in a normal office environment, people get influenced by their co-workers. If you share your office with an \u201ceveryday millionaire\u201d who got rich slowly, that changes your mentality, compared to being with people who are trying to keep up with the Jones\u2019.<\/p>\n\n\n\n<p>6. Professional players, like business people, are more likely to be risk-takers compared to people who become teachers or doctors. That is good if it is a calculated risk. For some, extreme risks are taken, hence things like gambling.<\/p>\n\n\n\n<p>It isn\u2019t just professional sports stars either. As mentioned, lottery winners often end up broke, as do many inherited wealthy people.<\/p>\n\n\n\n<p><strong>\u00bfLe duele la indecisi\u00f3n financiera? \u00bfQuiere invertir con Adam?<\/strong><\/p>\n\n\n\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/adamfayed.com\/es\/become-adams-client\/\">Convi\u00e9rtase en mi cliente<\/a><\/div>\n\n\n\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/adamfayed.com\/es\/good-match-quiz\/\" target=\"_blank\" rel=\"noreferrer noopener\">Realice el cuestionario de elegibilidad de clientes<\/a><\/div>\n\n\n\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/adamfayed.com\/es\/contact\/\" target=\"_blank\" rel=\"noreferrer noopener\">P\u00f3ngase en contacto con<\/a><\/div>\n<\/div>\n\n\n\n<p><strong>Adam es un autor reconocido internacionalmente en temas financieros, con m\u00e1s de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.<\/strong><\/p>\n\n\n\n<p><strong>Lecturas complementarias <\/strong><\/p>\n\n\n\n<p>In the article below, I spoke about&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>\u00a0\u00bfEs realista vivir de los dividendos durante la jubilaci\u00f3n?<\/li>\n\n\n\n<li>\u00bfPor qu\u00e9 est\u00e1n ganando tracci\u00f3n e inter\u00e9s las acciones y ETF sostenibles?<\/li>\n\n\n\n<li>\u00bfQu\u00e9 mueve a los empresarios privados?<\/li>\n\n\n\n<li>\u00bfCu\u00e1les son los mayores errores que cometen los propietarios de peque\u00f1as empresas?\u00a0<\/li>\n\n\n\n<li>Was Shark Tank Judge Kevin O\u2019Leary, who\u00a0<a href=\"https:\/\/adamfayed.com\/es\/want-a-chance-to-speak-to-kevin-oleary-from-shark-tank\/\">Me entrevistar\u00e9 la semana que viene, el 2 de noviembre.<\/a>, \u00bfun h\u00e1bil hombre de negocios o simplemente tuvo suerte?<\/li>\n<\/ul>\n\n\n\n<p>Para saber m\u00e1s, haga clic a continuaci\u00f3n<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-adam-fayed wp-block-embed-adam-fayed\"><div class=\"wp-block-embed__wrapper\">\nhttps:\/\/adamfayed.com\/is-it-possible-to-live-off-dividends-in-retirement\n<\/div><\/figure>","protected":false},"excerpt":{"rendered":"<p>Is investing in government bonds worth it? <\/p>","protected":false},"author":1,"featured_media":31075,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":{"facebook_10166176115445471_100883565069113":""},"rop_publish_now_history":[],"rop_publish_now_status":"pending","footnotes":""},"categories":[11798],"tags":[],"class_list":["post-31073","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investment-options"],"_links":{"self":[{"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/posts\/31073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/comments?post=31073"}],"version-history":[{"count":3,"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/posts\/31073\/revisions"}],"predecessor-version":[{"id":86791,"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/posts\/31073\/revisions\/86791"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/media\/31075"}],"wp:attachment":[{"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/media?parent=31073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/categories?post=31073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/adamfayed.com\/es\/wp-json\/wp\/v2\/tags?post=31073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}