Rates Are Rising. Is It Time to Sell Your Bonds?

Here is the article.

I like to take time to read and then understand how important it is to keep bond in my portfolio. And I should look into market shares instead of market value when bear market hits. I should learn the basics in order for me to make money as long term investor.

Making a Case for Bonds

Let’s start by examining the reason you added bonds to your portfolio in the first place. The main reason to buy bonds is to have an asset that hopefully grows faster than cash investments, like bank accounts and money market funds, but doesn’t drop — or at least not as much — as stocks can drop. So, we anticipate that bonds will provide returns somewhere around 4% to 5% over time, which is somewhere between cash, with returns between 1% and 2%, and stocks, historically at 8% to 10%.

If stocks take a turn for the worse, we hope bonds will cushion the fall. Has this been the case? Let’s look back at a couple of past periods and see if this held true — bonds helping a portfolio when stocks fell.

• This was the case in 2008. Stocks, as measured by the S&P 500 index, were down in 2008 (37%), while intermediate Treasury bonds were up 11.35% and international bonds were up 10.11%. Corporate bonds fell, but not by much (2.76%).
• How about in 2002? The S&P 500 index fell (22.09%) while government bonds, corporate bonds and international bonds were up 9.28%, 10.14% and 21.99% respectively.

So, in our last two big market pullbacks bonds would have given your portfolio a boost.