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Reply to "Is it a big mistake not to invest in the stock market right now? "
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[quote=Anonymous][quote=Anonymous][quote=Anonymous]If you are investing for long term (5+ years), go for it. If you need cash in the near term (next 2-3 years), save it in bonds.[/quote] Won’t bond prices go down if interest rates go up? And aren’t interest rates sure to go up?[/quote] Depends Floaters, kickers, TIPS, VRDO, step up bonds all do fine. Long term investment grade non callable bonds get hurt badly in rising rates. Here is an example of a kicker muni. Maryland muni bond maturing in 2032. Has a 5 percent coupon but is callable at par as callable Feb 1, 2022. It is not trading at a big premium as if rates stay low will be called Feb 1, 2023. If rates shoot in a lot this year bond might not get called and they get a “kick” in yield. Bond now paying 5 percent. If you bought a non callable 10 year 5 percent coupon bond today you pay a big mark up on bond and bond would fall in value a lot when rates rise [/quote]
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