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With the stock market in a bubble, should we invest in bond ETFs?
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⭕Today’s video is about:
1:00 Who is Buying Bonds?
3:52 Bonds for Capital Gain
4:31 Is TLT ETF a good investment?
7:32 Bonds Outperforming Stocks in 2020
10:46 Corporate Bonds
12:01 Why I hold Bonds?
Are BOND ETFs Good Investments? Invest in TLT ETF?
Since stocks are in a bubble with the Fed buying bonds, does it make sense to do what the Fed is doing and buy bonds? It may seem like a bad idea since the yield on those bonds are low but what about if you’re looking for capital gain. The TLT ETF $TLT this year beat the S&P 500 $SPX500 .
The Fed is currently buying the bonds issued by the US Treasury by Quantitative Easing (QE). This is how the Fed prints money. But apart from the Fed, the banks, insurance companies and other financial institutions have to hold bonds too since owning stocks is too risky. These banks buys bonds mainly for the interest payment, the yield. But now with all the treasury yield below inflation rate, it doesn’t make much sense owning these bonds. What about owning them for capital gain?
For example, the TLT ETF gained 70% over the past 10 years (80% with dividends). It is not as good as the S&P 500 but it is more stable if stocks are in a bubble that could be a good alternative. To understand if an ETF is a good investment or not, we need to look at the underlying assets. I have looked at the bonds inside the TLT ETF (more details in video).
If you look at most of the bonds inside the TLT ETF, you will see that most of the gains in prices of these bonds have already bond. This applies to bonds that will mature soon as well as bonds which will mature in 30 years. The coupon rates on most of the new bonds being issued are also very low and it is not worth the investment because of inflation.
Most of the capital gains of these bonds already occured in the last two years, which have been very volatile for stocks. We have a market correction in 2018 and a bear market in 2020. With stocks, there’s no limit to how high they can go. Stocks such as Netflix or Amazon are valued at more than 100 times earnings. But with bonds, there is a limit since bonds have a fixed income. At some point, bond investors will choose not to buy bonds and buy stocks instead. That’s exactly what’s happening. They could also buying corporate bonds and then junk bonds but with higher risks.
You could look at corporate bonds for higher returns, for example, the LQD ETF which contains bonds from companies such as JPMorgan Chase and Apple $AAPL . For higher yields, one could look at a junk bond ETF but the quality of the bond and the companies that issued them are of course, worse.
If we’re going to have higher inflation, then holding bonds is not a good idea at all then, why do I hold bond ETFs? This is a better alternative to cash. Since stocks are expensive. Bonds are a good alternative but not the best. The best is still arbitrage. The only reason why I hold these bonds is because arbitrage deals are rare this year but once I find enough good arbitrage deals, it won’t make much sense to have so much bonds in my portfolio.
⭕Who is Ishfaaq Peerally:
Ishfaaq Peerally is a popular investor on the leading social trading network eToro where he manages investment assets for over 100 people. On this channel, Ishfaaq talks mainly about investing, stock analysis, passive income, financial education, economics and entrepreneurship.
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Are Gold ETFS Good, Are BOND ETFs Good Investments? Invest in TLT ETF?.
Offering Gold Tips – How To Make Money Offering Gold Coins Online
Gold Investment funds: Such funds buy the gold mining business. Day trading is basically looking for stocks or bonds which move in one instructions or another. Well, ETF’s (Exchange Traded Funds) are simply like stocks.
Are BOND ETFs Good Investments? Invest in TLT ETF?, Play more replays related to Are Gold ETFS Good.
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You should have read it again once again on the stock investing newsletters that you subscribe,” Junior Mining Stocks are the very best financial investments for this years. Do not wait on the gold and silver mining stocks to breakout. Stay ahead of the crowd.” And the stuff like this.
The Gold ETF is one of my favorite trading lorries. Using easy trend lines and taking a look at the current rate action you can see that the rate of gold is looking all set for a pullback. Purchasing this level is chasing which usually suggests you purchase the high and panic out at the low.
You go to their website and see what rate existing rate they have. Do not be tempted also to some website who have more affordable or lower rate of gold bullion, they may be frauds.
The recently formed Gold Mining Stocks Wheaton who’s stock has doubled since its beginning has settled its first agreement with FNX mining. The agreement allows Gold Wheaton by gold for $400 and offer it into the marketplace at the spot rate for an initial upfront cash payment utilized to finish facilities and advancement. It’s the exact same design as Silver Wheaton which can buy Silver for approximately $3.90 an ounce.
Experts understand that the mix of slowing U.S. financial growth, the inflationary impacts of increasing oil and commodity rates and a change in supply-and-demand dynamics make gold a safe house, which is most likely to put even more upward pressure on its rate offered the tight supply. Much like throughout the last metals bull market, we will see one of the giants of business publishing a book that encourages financial investment in gold and rare-earth elements, an event which may well work as the tipping point towards a new financial investment Gold Rush.
Does this noise familiar? Its happened to me. This time. I believed, I’ve discovered a truly excellent service. I read the blurb. Its really convincing. These masters are making fortunes (or they certainly give the impression they are) however I’m not. Where, I wonder, am I failing? If I buy Gold Investment recommendations – is it worth paying for?
Recessionary warnings are on the increase. Numerous analysts are anticipating a painful and long economic crisis. This consists of Robert Prechter, a world leader in Elliott Wave Analysis. The Gold Bug Index is on the edge of a breakout. What you need to do is search for small gold mining business and buy their shares.
Finally, I must note that all this assumes that you wish to buy physical gold online. There are other methods to own gold without really owning gold. For example, you can buy a gold ETF or buy a gold exchange that will keep your gold for you. There are pluses and minus to these financial investment choices as well so it remains in your best interest to find out all you can previously purchasing.
The general guideline in portfolio management is to have no more than 5-10% of your money bought metals. Undoubtedly, starting small can result to wonderful, big things. In 1980, the rate of gold started at $524 per ounce.
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