So i tried to do some researches but I'm still confused about bonds.
This is what I understood:
- bonds are promises of repaying back with interest, so i buy a bond for 1000$ with 3% interest with the duration of 1 year and I'll get 1030$ after one year.
- bonds are safer than stocks because you can't lose money on them
but
- they can lose value if new bonds with higher interest are made, does this applies only to bonds etf or to actual bonds too?
- bonds should help during crisis because they are supposed to go up in value when stocks dip, this is why it's recommended to have a % of bonds in the portfolio.
What i don't understand is, why are most of the bonds etf i saw, barely in positive or negative? And does is it really worth sacrificing 20% of my portfolio in bonds? During bull periods being it would make the portfolio lose ~20% of the gains, does the rise of value during bear periods offsets that?
Looking at graphs of bonds etf it looks to me that I should only use them for money that i don't want risk in stocks, but don't want to keep in the bank either, but even then, they don't look that safe, take for example ICOV, other bonds etf had periods of about 1 year in which they were negative.
Am I missing something?
About me:
- 24 yo, europe
- student but should have part-time job
- i plan to invest most of the money i don't need in the following months but at the same time I don't want to risk them
Let's say my original plan was to invest 200 euros a month, but i can save 500 euros a month, of course i don't want to risk all the 500 euros, would it be safe to invest 200e in stocks/etfs and put the other 300 euros in bonds?
Is there any better plan for my money?
Thanks, I probably don't understand something really basic about bonds so feel free to correct me
Submitted September 01, 2018 at 09:43AM by SlowButConstantly https://ift.tt/2Pp5cLW
