This month’s Perspective comes from Steve Blumenthal, the Executive Chairman and CIO of CMG Capital Management Group, on the topic of rising interest rates. The reason we are sending this to you can be summed up with one quote from Steve’s work (emphasis mine):
I just don't believe the average investor knows just how much risk they are taking on with their so called "safe" investments.
If you do one thing with this email, follow this link http://www.cmgwealth.com/ri/radar-blood-streets-indeed/ and spend 2 minutes studying the first chart that you see as you scroll down (if it’s blurry, click on it and it will open a clear image). The numbers may be surprising!
Most portfolio managers and investors heavily rely on bonds to reduce the risk of their investment portfolios. This strategy worked remarkably well for the last 35 years as interest rates generally declined and bond prices rose. At some point this trend will end and rising rates will become a major headwind to investors. The simple truth is most investors just aren’t thinking about the potential for a 30%-60% loss on their bond positions.
If you or a family member have a “bond account” sitting out there (we often see these as inherited accounts), now would be a very good time to have an analysis done to make sure you understand exactly what you have. Feel free to send us a statement and we’ll give you our perspective on your holdings.
You have other options, besides bonds, to reduce the risk in your investment portfolio.