Why My Signal System Uses Bonds

In this video, I’ll show you why my Signal system uses bonds for safety.

Each permutation of my Sig system uses just one stock fund for growth and one bond fund for safety. For background on how the Sig system works, please see my video, How My Signal System Works.

In recent years, and again now, pundits have warned about a bond market crash. For an example of this, see my video, Should You Avoid Bonds, which defuses the latest warning from Bill Gross at Janus.

These bond warnings have led some investors to abandon bond funds in favor of riskier assets or dead cash.

But bonds have been around a long time, and have served their main purpose as income-providing, safe alternatives to stocks for many decades.

Let’s take a look at the history of stock bear markets and the bond market, with help from Ben Carlson, the director of institutional asset management at Ritholtz Wealth Management.

In a February 6, 2017 article on Bloomberg View, Carlson provided this table listing the 15 bear markets in the S&P 500 since World War II:

[Chart shown in the video, at 2:18.]

Would bonds have helped you through these bear markets? Absolutely.

Carlson provided this table listing the performance of 5-Year Treasuries through those same 15 bear markets:

[Chart shown in the video, at 4:05.]

This historical relationship between stocks and bonds is why they are the only asset classes I use in my Signal systems, and it will keep working.

Do not sell your bonds. Use them the way I do, to keep buying power ready for deployment into stocks during the next stock-market bear. It will greatly improve returns.


Want more videos like this? Subscribe to The Kelly Letter YouTube channel.

Thank you for watching!

This entry was posted in 3Sig, Bonds, Education. Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

Post a Comment

Your email is never published nor shared. Required fields are marked *

*
*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

  • Here are your three options:

    Option 1: Annual Subscription

    For just $236.97 per year, you’ll receive everything listed above to completely upgrade the way you manage your investments, including a copy of The 3% Signal. This is what I recommend:



    Option 2:Monthly Subscription

    If you'd like to try The Kelly Letter  without paying the full year, you can pay $19.97 per month, but it will not include a copy of The 3% Signal :


    Option 3:Free Email List

    If you'd like to hear more from me but aren't ready to part with any money yet, you're welcome to join my free email list:

    Join the free list






    Thank you for the work you do. You're a household name here and my wife and I often discuss your letters on Sundays. My ten- and seven-year-old children recognize your name and will eventually be taught to invest using 3Sig and 6Sig. You've had an enormously positive impact on our investing and inspired me to look at the world in more rational and clear terms than I did years ago. I'm sure that thousands of others would say the same. Kelly Letter subscriber Matt Barnes
    Matt Barnes
    Product Line Director
    OCLC

    Join Matt and thousands of other rational investors to invest without stress.

    Subscribe to The Kelly Letter  now!

Bestselling Financial Author