Thursday, March 18, 2010
Timing the markets one you can take to the bank
I have been writing for a couple of weeks that the stock market is nearing a short term peak. I think that peak is here or will happen soon. Market timing the market is very difficult to do. There is one case where timing your investments is an obvious. Right now interest rates are low. I don’t think you can find an economist who thinks interest rates are going to go lower. As interest rates rise the value of long and intermediate term bond funds will drop. Think about holding a bond with 10 years to maturity paying 3 percent. Let’s assume interest rates have risen. New 10 year bond are now paying say 10 percent. If you want to sell your 3 percent bond who is going to pay you face value for the bond? To sell the bond you would have to sell it below face value. This is true with long and intermediate term bond funds at this time. I would not hold these types of funds at this time. If you are going to be in a bond fund be in a short term bond fund.Fund picks for 2010 a sample portfolio. The bond fund is short term with some global exposure as well as a small holding in high yield bonds.