Tuesday, September 11, 2012

Wisdom From Bill Gross

William Gross is one of the smartest bond traders out there. And so this caught my eye:

... Most individual investors don’t have the privilege of time nor the choice of risking their investment dollars while being able to recoup it only at .1% money market or CD rates. An investor, it seems, must learn a new dance to fit the diminished return size of the modern dance floor.

If I were an individual investor, I would do this: Balance your asset mix according to your age. Own more stocks if you are young, but more bonds if you are in your 60s, like myself. If you choose an investment advisor, a mutual fund, or an ETF, make sure that your fees are minimized. After all, if overall returns average 3–4% annually how can you possibly afford to give 100 basis points of it back? You cannot. And be careful. The age of credit expansion which led to double-digit portfolio returns is over. The age of inflation is upon us, which typically provides a headwind, not a tailwind, to securities price – both stocks and bonds. ...

This is all basic, basic stuff. But when its said by a former rock and roller and 'Vegas card dealer who is now, arguably, one of the savviest investors on the planet, it carries more weight.

In the end, it's about your

1) Investment costs

2) Investment allocation, and

3) Sticking to your program.

Here's about the simplest and least expensive way to execute what BIll Gross is talking about.


Celshader said...

All of my bonds right now are in a mix of I-Bonds and VIPSX, which are both inflation-protected.

Despite this, I'm skeptical that the "age of inflation is upon us." I'll believe that when I see 15% CDs and 18% mortgages make a comeback.

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