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How to Buy Bonds by Jack Foster
This book includes a half-hour of complimentary investment advice from the author.
This book shares with the unsophisticated investor criteria on how to evaluate bonds. The analysis is based on proper portfolio diversification and preservation of capital.
The greatest weakness of investors is that they panic in recessions and times of financial stress. As a result, they buy high and sell low. At the very time when investors should be increasing risk they have historically reduced it. And, at the very time when investors should be decreasing risk they have historically increased it. Studies have shown that the result is that market prices are about three times more volatile than they should be if one just evaluated the fundamentals.
The second greatest weakness of investors is that they pay high fees and buy and sell too often. Fees, commissions and spreads between the bid and ask price of stocks and bonds result in enormous drains on returns. Whether a stock or a bond fund, the normal fees for a small investor is 1% of assets and normal trading commissions are .5% of assets. Therefore, the total cost for an investment advisor is usually around 1.5%. Although the 1.5% may seem small relative to your total assets, it is 25% of your expected total annual return of about 6%.
The question is how to protect oneself from economic cycles and from one’s own fears and ignorance. The answer is through a well understood principled and disciplined investment strategy. The objective of this book is to clarify an investment strategy for a mature investor with $100,000 to $2,000,000 to invest and the need to live off that investment. The objective of this book will be to recommend an investment strategy that requires that you only look at your investment portfolio once a year and make only one mathematical calculation to see if you need to adjust your monthly distributions from your investment portfolio. Another objective of this book is to recommend an investment strategy that forces you to sell high and buy low and reduce fees and trading commissions.
