You’ve seen headlines: Bond yields are rising. That’s been true for the most part over the last several months.
But here’s the thing.
When you’re starting at close to zero, you have a lot of ground to make up before yields get anywhere close to attractive. As a case in point, the 10-year Treasury yield has more than doubled over the past year, yet it still yields a pitiful 1.6%.
You aren’t getting rich on that. In fact, you’re getting poorer. Yields that low can’t even keep up with inflation. Plus, if bond yields continue to rise from here, you’ll likely take losses on any bonds you don’t plan to hold until maturity. (Assuming you buy a bond at a positive yield and it doesn’t default, it’s mathematically impossible to lose money on a bond held to maturity, at least before inflation.)
I don’t think you should put all of your money into stocks at today’s valuations. But there are better alternative than low-yield bonds.
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