Suze Orman on NBC Nightly News [doesn't like bond funds]

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Howard Donnelly
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Suze Orman on NBC Nightly News [doesn't like bond funds]

Post by Howard Donnelly »

Suze Orman was on NBC Nightly News this evening. She recommends getting out of bond mutual funds:

Suze Orman: Personal finance tips for surviving a debt default
http://www.nbcnews.com/video/nightly-ne ... /#53280546
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Re: Suze Orman on NBC Nightly News

Post by Leesbro63 »

I admit that I did not watch the video. If she is saying that long bonds are risky, I'll give her some credit. But if she's saying that because of the current political crisis one should sell bond funds, that's market timing.
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Re: Suze Orman on NBC Nightly News

Post by gkaplan »

Just one more reason I'm glad that I don't have a television.
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Re: Suze Orman on NBC Nightly News

Post by Tycoon »

Ask yourself the question, what qualifies Suze Orman to give advice on bond funds?
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Re: Suze Orman on NBC Nightly News

Post by Howard Donnelly »

Tycoon wrote:Ask yourself the question, what qualifies Suze Orman to give advice on bond funds?
If she wasn't "qualified," why would they have her on NBC Nightly News?
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Re: Suze Orman on NBC Nightly News

Post by Tycoon »

The logic is compelling. :wink: The longer I live the more convinced I am that people are sheep.
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Re: Suze Orman on NBC Nightly News

Post by Johm221122 »

Howard Donnelly wrote:
Tycoon wrote:Ask yourself the question, what qualifies Suze Orman to give advice on bond funds?
If she wasn't "qualified," why would they have her on NBC Nightly News?
Because she is a very good entertainer and fun to watch.I enjoyed her show
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Re: Suze Orman on NBC Nightly News

Post by joe8d »

She has always recommended holding individual bonds over bond funds.
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Re: Suze Orman on NBC Nightly News

Post by Leesbro63 »

So was she just saying to hold individual bonds instead of funds...or was she saying to dump all bond products (individual bonds and funds) because of the looming debt limit? Like the Dave Ramsey thread, many of us feel Suze is great for, perhaps, middle and lower middle income folks who need someone to remind them to live below their means...and provide details about how to do it. But for more affluent people, her investment advice is generally not good and sometimes very bad.
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Re: Suze Orman on NBC Nightly News

Post by staythecourse »

Interesting since she has noted she is something like 95% muni bonds in her own account.

I do agree with the above poster it is fascinating that folks believe every word that comes out of "experts" mouths as gospel despite the multitude of data confirming that experts are wrong more then then they are right.

Human behavior has and will always persist. The rat is smart after awhile he will not push the button that buzzes him, but man is not. It is intersting how many times man will push the wrong button despite getting shocked each and every time.

Good luck.
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Re: Suze Orman on NBC Nightly News

Post by Geist »

Having watched a number of episodes from her show on CNBC, this is nothing new for her -- for at least the last 1-2 years she has advocated against bond funds, because of the long-term interest rate risk. Additionally, she occasionally argues that short-term bond funds are subject to the same risk, and also trivial because of the low returns, so most people are better off just using FDIC-insured CDs or savings accounts. What she DOES advocate for is selecting individual bonds (individual muni's are her baby) with the intention of holding them to maturity, or seeking dividend-yielding stocks. Legitimate arguments on both sides, so I don't think what she's saying there is inherently bad advice. With that said, without the context of her long record of disliking bond funds, she does essentially say 'Because of this political mess, get rid of your bond funds.' I think her intention is to get people to do what she's always said is the "right idea", and is just couching it in the issue of the day that supports the reasoning...
Last edited by Geist on Mon Oct 14, 2013 7:54 pm, edited 1 time in total.
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Re: Suze Orman on NBC Nightly News

Post by Jim180 »

Howard Donnelly wrote: If she wasn't "qualified," why would they have her on NBC Nightly News?
Probably because her show is on CNBC which is affiliated with NBC.

I was surprised to hear her say she would prefer dividend paying stocks over bond funds for income. That's changing ones AA. What if we have a bear market in stocks? While the typical growth stock might fall 20%+, the dividend payer might still fall 15%. That's not much comfort in a bear market. A bond fund might actually increase in that scenario.
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Re: Suze Orman on NBC Nightly News

Post by Tycoon »

What are Suze Orman's credentials? Does she have a degree in finance? Does she have a long history of making money investing in bonds? Why would I put any more credence in what she says as opposed to my dentist? These are the questions I ask myself when she's propped up as an expert.
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Re: Suze Orman on NBC Nightly News

Post by Leesbro63 »

Suze conveniently forgets that in 1999 and 2000 she touted "QQQ". I distinctly remember that she used to say it as a "cutesy" thing...."QQQ". Then she would explain it and how important it was for her viewers to be in on the "new economy" and "where the world is going". QQQ...QQQ....
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Re: Suze Orman on NBC Nightly News

Post by GerryL »

I saw the piece when it aired (didn't rewatch it at the link above). What I recall her saying was that most people should do nothing in response to the shutdown/debit ceiling issue. Nothing. Retirees who depend on bond funds for income should get out of them. She also said something in favor of buying individual bonds instead, didn't she?

I knew I'd find discussion here about her advice. I'm not defending (or criticizing) her recommendation, just wanted to put it in context. I don't take investment device from talking heads on tv.
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Re: Suze Orman on NBC Nightly News

Post by stemikger »

She's about 6 months behind all the others who have been saying the same thing. I take what Suze says with a grain of salt, but Warren Buffett is saying the same thing and when he talks, I listen.
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Re: Suze Orman on NBC Nightly News

Post by Browser »

Let's check back in a year and see if she was right. Then, if she was, let's try to figure out if she is able to actually predict the future or just got lucky. :P
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Re: Suze Orman on NBC Nightly News

Post by abuss368 »

Sounds like market timing.
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Re: Suze Orman on NBC Nightly News

Post by B. Wellington »

The problem with the story was where does a retiree invest now? Dividend stocks with more risk? Bank CD's paying 0-1%? Maybe a combination of both?

If my retired parents were watching, they might be asking if they should sell? (They are invested in bond funds and income funds. i.e. Wellesley. Which is heavy in Corporate bonds.)?
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Re: Suze Orman on NBC Nightly News

Post by scrabbler1 »

B. Wellington wrote:The problem with the story was where does a retiree invest now? Dividend stocks with more risk? Bank CD's paying 0-1%? Maybe a combination of both?

If my retired parents were watching, they might be asking if they should sell? (They are invested in bond funds and income funds. i.e. Wellesley. Which is heavy in Corporate bonds.)?
The bolded part of your post is just what I would ask my friend (who is not retired) when his broker told him for years to get out of bond funds in 2008, 2009, 2010, etc. I told him that unless he had a good place to reinvest (or spend) the money in those funds he should just stay put and reinvest the tax-free dividends (it was an intermediate-term muni bond fund I am also invested in) every month.

He was glad he listened to me because when he bought his apartment in late 2011, he made a nice profit on the sale of many of the shares in that bond fund (for the down payment) which was just beginning its run-up. At least THAT was a good use of the money.
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Re: Suze Orman on NBC Nightly News

Post by Grt2bOutdoors »

stemikger wrote:She's about 6 months behind all the others who have been saying the same thing. I take what Suze says with a grain of salt, but Warren Buffett is saying the same thing and when he talks, I listen.
Well, Uncle Warren has been touting the S&P 500 for as long as I can remember, are you in it? Come to think of it, Jack Bogle has been touting to stay the course as long as I can remember as well - but then you put up a thread that contradicts what he is saying - are you listening? More importantly are you acting on what you have been hearing?
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Re: Suze Orman on NBC Nightly News

Post by Grt2bOutdoors »

Tycoon wrote:What are Suze Orman's credentials? Does she have a degree in finance? Does she have a long history of making money investing in bonds? Why would I put any more credence in what she says as opposed to my dentist? These are the questions I ask myself when she's propped up as an expert.
I'm waiting for someone to question Suze Orman live on television about negative convexity, duration, yield to maturity, etc. - just catch her off guard, because I'll bet my entire bank account she doesn't have a clue about how bonds really work. What she does know, girlfriend, is how to entertain the masses and get paid for it. Ever hear her shill about why everyone should have a trust?
Last edited by Grt2bOutdoors on Tue Oct 15, 2013 9:33 am, edited 1 time in total.
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Re: Suze Orman on NBC Nightly News

Post by cflannagan »

Howard Donnelly wrote:
Tycoon wrote:Ask yourself the question, what qualifies Suze Orman to give advice on bond funds?
If she wasn't "qualified," why would they have her on NBC Nightly News?
I hope that wasn't a serious question. That's like saying anyone who talks on CBNC or any "investing" TV channels are qualified to give you financial advice.
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Re: Suze Orman on NBC Nightly News

Post by Barry Barnitz »

Hi:

Transcript: Suze Orman segment with Brian Williams, NBC nightly news, Oct. 14, 2013. Nightly News: Personal finance tips for surviving a debt default.

regards,
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Re: Suze Orman on NBC Nightly News

Post by haban01 »

As other posters above have stated, Suzy's advice on bonds has been the same for years if not longer. She has always hated bond funds and preferred individual bonds. He investment advice ranks right up there with David Ramsey. The sad thing is that the general public will see her and make bad moves because she's suppose to be an "expert"! Her grade: Grade C-.
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Re: Suze Orman on NBC Nightly News

Post by Toons »

Yawn,,I bought more Total Bond and Short Term Investment Grade today :happy
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Re: Suze Orman on NBC Nightly News

Post by Call_Me_Op »

If I didn't know any better and just listened to her segment on the Nightly News, I would think stocks are safe, bonds (funds, not individual bonds) are risky. Very strange and confusing.
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Re: Suze Orman on NBC Nightly News

Post by Boglenaut »

Call_Me_Op wrote:If I didn't know any better and just listened to her segment on the Nightly News, I would think stocks are safe, bonds (funds, not individual bonds) are risky. Very strange and confusing.
Ackk...you fixed "sticks" to "stocks" before I could get my snarky comment in! ;)
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Re: Suze Orman on NBC Nightly News

Post by Call_Me_Op »

Boglenaut wrote:
Call_Me_Op wrote:If I didn't know any better and just listened to her segment on the Nightly News, I would think stocks are safe, bonds (funds, not individual bonds) are risky. Very strange and confusing.
Ackk...you fixed "sticks" to "stocks" before I could get my snarly comment in! ;)
:wink:
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Re: Suze Orman on NBC Nightly News

Post by Call_Me_Op »

My best guess is that she's thinking that if bonds start a long period of decline in value, if I hold a high-quality bond and wait for it to mature, I am guaranteed to get back my principal and all of my interest. A fund has no such maturity date and thus no such guarantee.
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Re: Suze Orman on NBC Nightly News

Post by Leesbro63 »

Call_Me_Op wrote:My best guess is that she's thinking that if bonds start a long period of decline in value, if I hold a high-quality bond and wait for it to mature, I am guaranteed to get back my principal and all of my interest. A fund has no such maturity date and thus no such guarantee.
Yeah, but what will your principal and interest buy? There's no guarantee of BUYING POWER. If you need a certain amount of dollars in a certain time period, you are right that the odds favor a the bond over the fund. But if you are a long term investor who reinvests maturing bonds and interest, a fund is the same thing (assuming the fund has an average duration and maturity similar to the bond portfolio you are comparing it to).
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Re: Suze Orman on NBC Nightly News

Post by Ricola »

Anyone remember Elaine Garzarelli?...believe she won the "One Hit Wonder Award". Was correct on the 1987 crash and then was amazingly bullish right up to every other major downturn afterword. :oops:
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Re: Suze Orman on NBC Nightly News

Post by abuss368 »

My sister is reading one of Suzy's books where she recommends index funds and tax exempt bond funds for taxable accounts.
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Re: Suze Orman on NBC Nightly News

Post by elgob.bogle »

I believe that Larry Swedroe also touts individual munincipal bonds over bond funds, and purchases, after careful screening, individual bonds for his clients.

elgob
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Re: Suze Orman on NBC Nightly News

Post by Leesbro63 »

elgob.bogle wrote:I believe that Larry Swedroe also touts individual munincipal bonds over bond funds, and purchases, after careful screening, individual bonds for his clients.

elgob
Perhaps Larry can add enough value for his fee to do this and provide a return better than a good muni bond index fund. I am skeptical in general, however. I used to buy my own muni bonds and had a portfolio. I've let them all get called, mature or a few I sold. My conclusion was as follows:

1. The retail public always gets the crappier bonds...not at the peak of the yield curve.

2. I never knew for sure how much I was getting nicked when I purchased.

3. Called bonds were a PITA (although this was a problem during falling rates...going forward this may no longer be an issue as rates can't really fall much)

4. The accounting was a minor PITA. Keeping track of buys, calls/sells/matures, remembering to amortize any premiums.

5. The fund is more portable for changes. I am thinking of when my parents moved to Florida and PA funds were no longer as appropriate as national funds. If they had a portfolio of individual bonds, it would have been tough to change...probably would have had to just wait until the bonds naturally came due.


The "fund solution" made sense and it took about 10 years to totally liquidate my bonds into funds but I'm glad to be rid of that hassle now. Again, perhaps Larry has a professional's buying advantage that makes his fee (and the extra accounting fees) worthwhile. But I'll stick with the Vanguard fund.
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Re: Suze Orman on NBC Nightly News

Post by Meg77 »

As for what qualifies her to give advice, I'm a little confused about that scoffing. She has more qualifications than any professional financial advisor I know and certainly at least as many qualifications as we random internet advice-givers can tout. She did work as a licensed professional in the financial services industry before changing over to the advocate/educator/book writing side of things. She also has a ton of money (unlike many financial experts by education) which she seems to manage just fine. She has written countless books and hosted countless financial-based radio and TV, so she's forced to continually educate herself way beyond the scope that any normal stockbroker or estate planner does.

No one here is actually disputing her advice anyway so I'm not exactly getting where the hate is coming from...what exactly is wrong with advocating individual bonds over bond mutual funds? Her investing advice may not be perfect (nothing that is applicable to a mass audience can be), but I've never heard her say anything I disagree with, and I watch her show regularly. She advocates that people avoid loaded mutual funds, hold for the long term, ignore the news when it comes to investing decisions, minimize fees and commissions when investing (by choosing index funds, avoiding trading, avoiding expensive insurance products which most people don't need), and so on. She also focuses on figuring out WHY you are screwing up your financial life in the first place. That is where the entertainment comes in when she goes all Oprah on callers, connecting spending patters with emotional problems or self esteem issues. She's not perfect, but she's an "expert" if there ever was one, in my opinion. Of course no one knows everything and educated minds can disagree.
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Re: Suze Orman on NBC Nightly News

Post by Howard Donnelly »

Meg77 wrote:As for what qualifies her to give advice, I'm a little confused about that scoffing. She has more qualifications than any professional financial advisor I know and certainly at least as many qualifications as we random internet advice-givers can tout. She did work as a licensed professional in the financial services industry before changing over to the advocate/educator/book writing side of things. She also has a ton of money (unlike many financial experts by education) which she seems to manage just fine. She has written countless books and hosted countless financial-based radio and TV, so she's forced to continually educate herself way beyond the scope that any normal stockbroker or estate planner does.

No one here is actually disputing her advice anyway so I'm not exactly getting where the hate is coming from...what exactly is wrong with advocating individual bonds over bond mutual funds? Her investing advice may not be perfect (nothing that is applicable to a mass audience can be), but I've never heard her say anything I disagree with, and I watch her show regularly. She advocates that people avoid loaded mutual funds, hold for the long term, ignore the news when it comes to investing decisions, minimize fees and commissions when investing (by choosing index funds, avoiding trading, avoiding expensive insurance products which most people don't need), and so on. She also focuses on figuring out WHY you are screwing up your financial life in the first place. That is where the entertainment comes in when she goes all Oprah on callers, connecting spending patters with emotional problems or self esteem issues. She's not perfect, but she's an "expert" if there ever was one, in my opinion. Of course no one knows everything and educated minds can disagree.
Meg77: Thank you for your thoughtful and polite response.
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Re: Suze Orman on NBC Nightly News

Post by Jim180 »

Maybe Suze Orman does know a lot about investing, but we rarely get to see it. I admit I have not read her books. Her show on CNBC is mostly geared to people who have little money and a lot of debt. If she would sometimes address questions from people who do have money to invest , people might gain more knowledge and have more respect for her. But week after week it's the same old thing from her. (buy LTC insurance and have a 6-8 month emergency fund, have a revocable trust) The only interesting segment is "How am I doing?", but even there she never says they are doing good enough. She seems very much against early retirement, always warning people about some potential catastrophic event that could occur after they retire. If we all want to guard against everything that could happen, then we could never retire. Suze may enjoy her job very much and thus never think about retiring herself, but she must realize that many people also are very stressed out with their job so it would do them much good to retire ASAP and just take a chance that their funds will last.
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Re: Suze Orman on NBC Nightly News

Post by Avo »

Meg77 wrote:what exactly is wrong with advocating individual bonds over bond mutual funds?
Let me begin by saying that I am generally a fan of Suze's show, and that my wife is a huge fan; we try to watch the show every week, and have done so for several years.

But her advice, to her audience, to buy individual bonds is awful.

This might be fine advice to a high-net-worth person who has the time and ability to research individual bonds, and to not get fleeced on commissions and/or trading spreads. The does not describe the vast majority of Suze's audience.

Suze's stated reason for preferring individual bonds is that you can lose money in bond funds. I can't tell if she (1) actually doesn't understand that a collection of individual bonds with varying maturities can lose money in exactly the same way if marked to market, or (2) knows that, but thinks the psychological effect of not marking to market is important.
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Re: Suze Orman on NBC Nightly News [doesn't like bond funds]

Post by Call_Me_Op »

Suze goes into a little more detail on her position regarding individual bonds versus bond funds here.

http://www.bing.com/videos/watch/video/ ... o/3xrgp7hq
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Re: Suze Orman on NBC Nightly News

Post by abuss368 »

elgob.bogle wrote:I believe that Larry Swedroe also touts individual munincipal bonds over bond funds, and purchases, after careful screening, individual bonds for his clients.

elgob
Interesting. Why when Vanguard offers the intermediate term tax exempt admiral share fund of the simple and low expense ratio of just .10?
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Re: Suze Orman on NBC Nightly News

Post by Call_Me_Op »

abuss368 wrote:
elgob.bogle wrote:I believe that Larry Swedroe also touts individual munincipal bonds over bond funds, and purchases, after careful screening, individual bonds for his clients.

elgob
Interesting. Why when Vanguard offers the intermediate term tax exempt admiral share fund of the simple and low expense ratio of just .10?
Because expenses aren't the only important consideration. Larry sticks to only very high quality munis (AA and AAA ratings), and avoids certain industries as well as high tax states.
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Re: Suze Orman on NBC Nightly News [doesn't like bond funds]

Post by nedsaid »

I disagree with Suze Orman about bond funds. Most investors should use the funds and skip buying individual bonds, particularly corporates. Based on a family member's mixed experiences with individual bonds, I recommend good bond funds with intermediate maturities.

Here are the pitfalls of individual bonds:

1) Many bonds are thinly traded. You have the bid/ask spread and the commission. You know what the commission is but you may not know what the spread was that you paid. Most bonds trade through a network of brokers and not on an exchange. Trading these is more expensive than you might think. In most cases, you want to hold these to maturity.

2) With corporates, the credit rating can change and often not for the better. You can't expect your broker to keep on top of this for you and you wind up being your own credit analyst.

3) Bonds are more complex than what people realize. Credit rating as given by the rating agencies, call dates on the bonds, secured or not secured, and you need to know in what priority the bonds are for repayment in case of default.

4) At a full service firm you can never be sure if you are just being offered the stuff than the firm doesn't want any more for their own portfolio. You might be buying someone else's problem and not even know it. I was very suspicious that this happened to my family member.

Individual bonds can be done. Individual corporates can be owned in a portfolio. But investing in these is not as simple as people think. Invest in these with your eyes wide open and aware of the pitfalls. I am sure folks on this forum have done this successfully. Just be aware.
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Re: Suze Orman on NBC Nightly News [doesn't like bond funds]

Post by momar »

Just because you own individual bonds and aren't paying attention to their value doesn't mean they don't also lose value when interest rates rise.
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Re: Suze Orman on NBC Nightly News [doesn't like bond funds]

Post by Leesbro63 »

momar wrote:Just because you own individual bonds and aren't paying attention to their value doesn't mean they don't also lose value when interest rates rise.
+1. And it doesn't mean they don't lose purchasing power when inflation rises.
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Re: Suze Orman on NBC Nightly News [doesn't like bond funds]

Post by Jim180 »

Here's an article from a fee-only advisor from my area that makes the case for bond funds vs. individual bonds.
http://www.cpbj.com/apps/pbcs.dll/artic ... e=printart
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Re: Suze Orman on NBC Nightly News [doesn't like bond funds]

Post by Leesbro63 »

To be fair to Suze, for her audience, fixed income securities with defined maturity values (regardless of the purchasing power) are easier to understand. Joe Sixpack understands that his $10,000 CD will be worth $11,000 in 2 years at 5% (ignoring compounding). He gets irritated if inflation runs at 7% and gets it that his money buys less, but he understands that this is the deal he made. Buying a bond fund that declines in value as rates rise irritates him more because there is an expectation that the fund will behave like a bond...won't lose principal value. And many Joe Sixpacks will mismatch fund duration with the time when the money is needed...unlike an individual bond or CD where it's pretty clear that the bond will mature in 2 years when the car needs to be replaced. So I can't fault Suze for tailoring this piece of advice to her audience.
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