Episode 93: Many investors are deluding themselves with a false sense of asset allocation security. Diversification is necessary but don’t be confused with simple schemes that promote security through bond funds.
A foolish formula is often used to determine bond fund allocation simply by age- promoting the false assumption that bond funds are without risk. This has never been true and is even less true today because of prolonged acute & chronic central bank interest rate manipulation.
A large rise in interest rates will have a devastating impact on the principle held in bond funds.
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