Bonds in Curent Market

What is the status of "Bonds in Current Market"?Current market means Recession 2008 and Global Economic Slowdown period here.

Should you Invest in Bonds in Current Market?

What is the Status of Bonds in Current Market?

Well,First of all understand the basic principal of Investment that,Any Investment weather it is a Stock,Gold,Bond or Real Estate is based on your Financial goals and Time remaining to achieve that Financial Goals.

Any Investment Decision does not alter according to Current market conditions.In fact current market conditions does not have any effect on long term Investment Outcome.

As a Basic Rule,Equity is for Longer Time Horizon(More than 5 years) and Debt/Bond is for Short to Medium Time Horizon Investments.

If you are near you retirement than you should have more money in Bonds and less money in Equity while if you have just started your earning career than you should have most of your money in Equity and less or minimal money in Bonds.

If you are talking about status of Bonds in current market than let me tell you that even though the stock market is at its bottom and investors are losing their money daily,It is better to invest your Money in Equity rather than in Bonds.

I know that there are so many so called Financial advisers worldwide that who are advising right now the Safety of your Money and advising you to Invest in Bonds.They are telling you that Bonds are safer than Equity in current Market but the reality is that Return is always a factor of Risk.Weather you invest in Equity or in Bonds the risk of market on both of these financial product is the same.

So Why Bonds are not safer than Equity in current Market?

Well,Financial advisers will advise you that Bonds are safer than Equity so Invest in Bonds. But the fact is that in the current market bonds are riskier than Equity....DO you know Why?

Well because of Inflation.Currently Inflation is 10% in India and Bonds are offering you 8.5% per Annam return.So if you Invest your money in Bonds than the real return on your Bonds will be 8.5 - 10 = - 1.5%

Can you believe that,Your bonds are earning negative return right now? It means that suppose today you Invest Rs.100 in some Bond than after 1 year on paper its value will be Rs.108.50 (8.5% Return) but in reality the purchasing power of that Rs.108.50 after 1 year will be today's Rs.98.50 only (Because of Inflation of 10% the real return is -1.5%)

So Bonds will hurt your Money in the Long run.But we can't help it.

So According to my Advise,Investment decision should be according to your Time Horizon.For Longer (more than 5 years) Time Horizon Equity and for Short to Medium (3 to 5 years) Bonds.......... Forget the Current Market Conditions.It has no role in making Investment Decision.....!!!!!!!!