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Nancy Graham CPA, CA, CIM, CFP, TEP

Portfolio Manager
Contact
  • T613.237.5544 x 303
  • 1.800.230.5544
  • F613.237.5949
  • 265 Carling Avenue,
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  • Ottawa, Ontario K1S 2E1

What’s the Scoop on Bonds?

March 9, 2017 - 2 comments

Stocks and bonds. You don’t have to be an investor for long before somebody suggests that you should have some of both. Bonds are supposed to be your financial safety net, while stocks are where you hope to earn your higher-flying returns … or so you’ve heard.

Okay, but what is it that makes bonds and stocks so different from one another, and how do these differences apply to your own investing? In today’s “No Dumb Questions” video, you’ll find out this and more about the bond side of your stock/bond portfolio mix.

It starts by understanding the basic structure of each holding

  • When you invest in bonds or bond funds – you are making a loan to a business or government agency; your returns come from the interest paid.
  • When you invest in stocks or stock funds – you are purchasing an ownership stake in a business; your returns come from increased share prices and/or dividends.

These essential differences are often lost in all the talk, talk, talk about yield curves and interest rates and Bank of Canada monetary policies. An yet, they actually explain nearly all of the reasons stocks and bonds behave differently from one another over time, and why it makes sense to hold an equal portion of both. Get a good feel for these basics, and you’re well on your way to making sense of what all that bond talk is all about.

 

The basic nature of stocks versus bonds also explains why each exposes you to very different sorts of risks and expected returns. Speaking of bond risks, another question I often hear is this one: “Nancy, if bonds are supposed to be so ‘safe,’ why do my bonds or bond funds sometimes decline in value?”

That’s a great question as well. So great, in fact, that I’m going to cover it in a video of its own, my next “No Dumb Questions” segment. Stay tuned for that!

By: Nancy Graham with 2 comments.
Comments
  14/03/2017 1:36:25 PM
Tara
Hi Anita!

My name is Tara and I'm the producer of this series.

Sorry you found the music irritating. We've dropped the levels of the background music over time quite a bit compared with other videos we work on, but will keep that in consideration. Part of the issue with these videos is actually the hiss of the air intake in the recording studio, which we've fixed (hopefully! you'll have to let us know) in more recent videos by investing in a really high-end microphone. The music is low, but her audio is hissy, it may seem like it's competing.

In the meantime, we also create Closed Captions for each of these videos if the sound is irritating. Just hover your mouse over the video and click on the 'CC' to reveal the captions. While we fix the sound issues, it will hopefully make it easier for you to follow along without having to turn up the speakers.
 
  09/03/2017 7:51:09 PM
Anita
Your video was great. It would help to turn down the background music because I couldn't hear or concentrate on the msg without turning up the volume so high that it all became irritating!
 



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