Stay Afloat in the Storm: Bonds as Your Lifeline Amidst Economic Uncertainty


When the economic landscape turns turbulent, it can be a stressful time for anyone invested in the markets.

Despite the uncertainty of an uncertain future, there is one investment option that has proven to provide stability and security: bonds!

Whether you’re just starting out as an investor or have years of experience under your belt, understanding how bond investments can help you stay afloat amidst volatile markets is important knowledge to have.

In this article we’ll discuss why bonds are a wise choice during times of financial adversity and how they can work to shore up your portfolio so you can rest assured knowing that despite any economic storms on the horizon, your finances will remain secure.

#1. Get Good Advisors

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This plan is something that many people overlook. They don’t see the benefits of having an impartial mind considering everything for you.

A forum member stressed the need for this impartiality and lack of emotion in financial decisions.

They said, “You should hire someone to make these decisions. Hiring a financial counselor may seem silly as you can read and learn the same as a Financial Advisor.

Still, emotions can get in the way since you are human and dealing with your own money. You’ve mentioned several hazardous potential options when investing with your feelings. Go all to cash, face reinvestment rate risk, and potentially miss out on the upswing in the market.”

#2. The Future Isn’t Written

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While many people have opinions on what will happen in the future, it’s impossible to be right 100% of the time. A person who does not believe in prognostication stated, “No human alive knows the exact direction in the market will move with 100% certainty—anyone who pretends to be foolish or lying to you.

Proper Asset Allocation, following modern portfolio theory, and investing for the long run are the ways to deal with that uncertainty.

There are zero guarantees that the stock market will become cheaper relative to bonds in the future, even if a recession does happen. We have witnessed a fair amount of inflation over the last year or two. Inflation means dollars are worth less; when that happens, the prices of everything – including stocks – will tend to rise.

Suppose there’s enough (and unpredictable enough) inflation that economic activity goes down. In that case, corporations become worth less, creating downward stock pressure, but that low pressure may not be greater than the upward pressure from inflation.”

#3. Paper Losses, Paper Wins

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This wise person reminded the original poster of this bit of truth.

He said, “Remember, when your 401K dips, it is only a paper loss. When it goes up, it is only a paper win. The only time the price of any fund or stock counts is when you buy or sell it. Check your funds and be sure everything is smooth in there. If something goes under, then it will be an actual loss.

That is what they mean when they talk about the 2008 bailout. However, some of those guys should have gone to jail.”

#4. The Market Goes Up And Down

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An important lesson that all investors have to remember is that the market goes up and down.

In the short term, these swings down can cause you to lose money. But over the long term, the market goes up.

This is why is it critical to take a long term view of investing.

If you are only investing for 5 years or less, there is a good chance you will lose money.

But if you are investing for 10, 20, or even 30 years, you will make money.

#5. Don’t Let Emotions Control You

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When was the last time you make the right decision that was based purely on emotion?

Chances are it was never. And this is what does most investors in.

They allow their fear or greed decide to invest or not. You are your greatest enemy when investing. Have a plan and stick with it for the long term.

#6. Stick to Shorter Term Bonds

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If you must put some money into bonds, it is recommended you stick with shorter duration bonds. In other words, bonds that will mature in five years or less.

These are less sensitive to changes in interest rates, which is important since the Federal Reserve might continue to raise interest rates.

#7. Auto Purchase During a Down Market

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Here’s a response that discourages what the individual is considering.

This commenter advised, “If you are relatively young, a down market is a gift as your shares auto purchase new shares through dividend reinvestment for much lower from when you bought. Then when the market goes up again, your portfolio will be even more significant.

Never sell based on market conditions when you are young. You set an age-appropriate asset allocation and sit with it. You place your dividend stock to buy more shares with the paid dividend instead of cash.”

#8. Back In 2016

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How did a similar plan to what the original poster is considering fare in the past?

A commenter who watched a friend do something similar said, “A good friend of mine went all bonds and cash in 2016 because “the market was too bull for too long,” and everyone was parroting the Recession. He thought I was crazy for keeping the investments going monthly without changing.

He finally bought back in – in late 2019 and sold on the Covid drop. I’m far, far ahead of him now with similar total investments. I timed nothing, made no changes, and have been 100% stocks, S&P, for over two decades. Good luck!”

#9. Don’t Worry, You’re Still Young

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Finally, this comment was a reminder that the original person and his parents are in two different age groups and that his parents are moving toward retirement.

This canny contributor cautioned him, “Moving your portfolio out of stocks and into bonds is something you’d start to do within a decade of retirement, regardless of the state of the market.

If you’re still 20 or 30 years away and have another couple of boom-bust cycles to get through, as others have said, keep buying in slow and steady into general stock funds, and don’t try and be too clever. The S&P is 17% off its all-time high and is unlikely to drop much below 20% of its December 2021 peak unless there’s a global catastrophe. In other words, don’t worry too much!”

#10. Set Up A Play Account

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Some investors take 5% of their money and actively trade with it.

This solves two problems. First, it gives them a sense of control, or an outlet for their fear.

They feel better making moves based on emotion.

The second issue it solves it that it shows you how bad you are at making investment decisions.

Most people who actively trade will lose most of this money. This is why you should only use 5% of your wealth.

Ideally, once you see that you did worse than the rest of your portfolio, you will be more inclined to ride out the market.

Become a Stock Market Millionaire

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Do you want to know how to invest and build wealth?

Here is a step-by-step guide to help you do just that.


Dave Ramsey’s Investment Advice Is Bad For Your Wealth

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Dave Ramsey offers a lot of great advice when it comes to getting out of debt and building a solid financial foundation.

But when it comes to his investing advice, it’s not what will ensure you with the most money, and could leave you broke.


Is VTSAX A Good Investment?

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Many people consider investing in the Vanguard fund VTSAX.

But is it s good investment or right for you?

Here is what you need to know.


How Much Money Do You Need For Retirement

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Do you know the right amount of money you need to enjoy retirement?

Headlines tell you that you need $1 million dollars or more. But this might not be the case. Find out exactly how much money you need.


How To Invest In Yourself

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We all know we grow wealth by investing in the stock market or putting our money into savings accounts.

But many of us are unaware that the best returns are by investing in ourselves. When we improve ourselves, we have the ability to earn a lot more money, which makes it easier to become filthy rich.


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