Why Now Might Be the Best Time To Buy Bonds
Written by
Chris Adam
Edited by
Amber Barkley
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The roller coaster ride of the stock market in recent weeks has some investors wondering if they should seek safer and perhaps more dependable options to protect their money. Bonds are seen by some investors as a potential answer.
CNBC reported that bonds are looking good for those wanting more safety in bear market conditions. That’s not the only reason now might be a good time to buy bonds, according to finance experts who shared their advice with GOBankingRates.
Next, learn how to decide between stocks and bonds for your financial goals.
Lower Rates
“I’ve been investing for a while, and I gotta say that when the Fed starts hinting they might cut rates, like they’re doing now, that’s when bonds can really shine,” said Andrew Lokenauth, a finance and money expert. “See, when rates go down, existing bonds become more valuable. It’s pretty simple math.”
Lokenauth added that buying now could mean catching both the high yields and some price appreciation. Lokenauth called that a double win.
Higher Yields
According to Chris Heerlein, CEO of REAP Financial, yields are finally doing their job again. For the first time in over a decade, Heerlein noted, investors can lock in real income without taking on equity-level risk.
“We’re seeing retirees and conservative savers shift toward bonds because the math finally works,” Heerlein said. “If interest rates stabilize or fall, today’s bond buyers could also benefit from price appreciation, not just yield.”
Lokenauth pointed out that as prices start to stabilize more and consumers feel less of the inflation impact, bonds make more sense for many investors.
“The yields are just nuts these days,” Lokenauth said. “I mean, we’re talking about getting paid 4% to 5% on Treasury bonds — that’s some serious cash for basically lending money to the government. And here’s the thing: Inflation’s finally starting to chill out, which makes these rates even sweeter.”
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