Wall Street's Advice on What to Buy Instead of Bonds

We are all well aware that bond rates have been very low and that it's difficult to get any worthwhile interest with bonds today.  As interest rates are expected to rise, bond values are expected to fall.

Since bonds are not such a great place to be right now, Wall Street is on the hunt for “bond alternatives”. Here is a great example from Mark Hulbert of MarketWatch, interviewing different Wall Street pros on their recommendations – http://www.marketwatch.com/story/what-to-buy-instead-of-bonds-2014-01-10.

This article reveals that many Wall Street pros are recommending you replace your bonds with things like Real Estate Investment Trusts (REITs), Utilities, and / or Business Development Corporations (BDCs). Which all represent nothing more than a urgent hunt for yield.

What they aren’t telling you is that these alternatives don’t play defense very well. Meaning, they may provide the yield Wall Street is hunting for, but they leave themselves wide open to downside risk. Which means you could potentially lose a lot of money in these types of investments, much more than you can lose in bonds.

It is interesting that in the urgent search for bond alternatives these Wall Street pros seem to ignore a great bond alternative that works extremely well and has been around forever. An alternative that many non-Wall Street financial pros have preferred to bonds because they provide steady income and principle protection. 

This alternative is known as a fixed deferred annuity, which provides principal protection, interest is paid, and you don't have to worry about losing any money. 

So, why isn't Wall Street turning to this bond alternative?

When you send money into fixed deferred annuities, that money is being taken away from the Wall Street guys, and thus taking away potential money they could make.

Today’s financial industry offers a wide range of options. So, make sure that when speaking with an advisor your needs are put first and solutions are offered according to those needs.

If you would like to talk to our team regarding your retirement planning, feel free to give us a call at 775-853-9033.

Chris Abts