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Bonds in a Low Interest Rate Environment (Part 1)

4390590597_a181a3d9b9_mIn today’s ultra-low rate environment bonds are yielding a pittance. Moreover, at some point the central banks of both Canada and the US will need to relent and allow rates to increase moderately.

For savers trying to construct a conservative portfolio this puts us in a difficult position of trying to balance risk and return. Bonds, which used to provide preservation of capital, a deflationary hedge, and a real return of some size, are now in the position of providing returns that are below inflation and the possibility of lost capital if you purchase a bond fund and interest rates rise!

If you’re new to bonds, below is  a collection of the wonderful resources available online. The truth is that the subject of bonds is a really big one, so this is just a selection to get you started:

Now that you’re familiar, it’s also important to understand bonds in terms of our current low interest rate environment (May 2014).

Now that you are well armed with information on bonds, Part 2: Buying Bonds in a Low Interest Rate Environment.

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