10-31-2013, 11:52 AM
(10-31-2013, 10:35 AM)hendi_alex Wrote: I have very limited experience with bonds, but would expect short to medium duration government bonds to fare better than stocks or corporate bonds. I would shy away from anything that doesn't have a mandatory redemption date. As far as entry points, even though bonds will be hurt with rising rates, when there is blood in the streets, bargain prices may be sufficient to compensate for any rising rate risk. In any event, I'll not be jumping in all at once on any of the fixed rate kinds of investments.
One thing for sure, it is not hard to imagine the effect on portfolios that 7%-10% yields on utility stocks, property REITs, MLPs, and BDCs will represent. Also, if rates move back just to more historic norms of say 5% on a medium duration CD, how attractive will 2% or 3% yielding common stocks be? That kind of change would likely have a tremendous impact on demand for many of the DG types of stocks. Of course that will be a time for slow and steady accumulation, won't it?
If a rotation from DG stocks to bonds/cds happens it will drive their prices down and their yields up higher than 2-3%. It could make for some attractive entry points as long as company fundamentals remain the same.
All of this is speculation and TBH no one knows what will happen. I try not to make my investment decisions based on speculation. I'll continue to look for attractive entry points into div stocks to deploy capital.