noxiousdog wrote:
No. If you hold bonds to maturity, that might be the case, but rarely does anyone in our investor class do that. Even in that situation, you have to hold it to maturity. Otherwise, bonds trade just like stocks. When interest rates go down, the bond price goes up; when interest rates rise, the bond price goes up. Often substantially, and if the company is in danger, it's even more extreme.
Actually I knew all that but completely muddled my remembering. I don't mean to sound like I didn't need to be told, because I did. Thanks for clarifying. Bonds typically work in inverse to equity is what I recall.
noxiousdog wrote:
For laymen who have no interest in anything other than a good savings plan, I suggest 6-12 months living expenses in cash or equivalents (cds, savings bonds, t-bills) and the rest in a broad market, low cost, equity index fund.
All s&P 500 index funds should be fairly identical so pick the one with the lowest cost. If you can buy in big chunks (you'd have to do the transaction cost math), RSP is a good equal weight ETF. VFINX is a good cap weighted fund.
I personally do some hedging with re-balancing. I keep distinct percentages of my money in bonds, real estate, domestic equities, foreign (equities/bonds), cash, and speculation. When one is out of whack, I take money and put it in one of the other classes, the theory being that the one out of favor will eventually be back in favor eventually. I do not have any hard metrics saying whether it works or not. Soft metrics implies that it does.
Thanks! Is S&P the way to go or is that simply your preference, or both?
When you say real estate, are you holding actual real estate (with deeds), or mortgage funds or something similar?
Since most of my investing will be long term, I don't feel a huge need to hedge right now, even if it might give me slightly better returns if I were to actively manage. I'm definitely a fire and forget investor, unless I'm just playing. As I get closer to retirement, then I'll start getting antsy about hedging and diversification, I think.
In Canada we have RESPs (registered education saving plan) and the government kicks in 20% up to a certain amount (not a huge amount, but 20%!). The kicker is that if none of my children use it for education then the government claws a whole crapload back. With 3 kids I'm doing a family plan which allows the kids to withdraw the money in any % they want as long as it's used for recognized educational expenses. i.e. one kid can use 97% of it, another 3% and the third 0%, or any other combination. We also have individual plans but they can't be shared so it seemed too restrictive.
My "plan" (which is more of a vague thought than a plan) was to have about $20k per kid. I figure that might be able to cover the first 2 years (without housing) and if they want to finish they are going to have to save some of their own money. I'm sure I will be willing to negotiate when the time comes, but I want them to spend some of their own money so they appreciate what's involved in getting an education and take it seriously.
