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Understanding Bonds

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September 15, 2022

You might not think you care about bonds. But if you’re an investor, you probably care about bonds even while you’re not caring about bonds. Especially now.

It’s been a rough start to the year for bonds. Since January, Canadian bonds have been down more than 12%, and U.S. bonds are down nearly 10%. That may not sound so bad when compared to stocks – some indexes have sunk nearly 30% in that same time. But it’s not usually supposed to happen this way. And bonds’ poor performance is the underlying secret to why many investment portfolios are struggling a lot more than expected.

Traditionally, when stock prices fall, the price for bonds tend to go up. That’s a big part of why diversified portfolios typically include both. This is the first time in nearly 30 years that both stocks and bonds have fallen by more than 10% in the same period. What luck!

So why is this happening? Is it going to last? What should you do right now if you don’t want to have such crappy returns? Well, the first thing to do is understand what bonds are, how they work, and why they’re currently letting us down. Where can you do that? Right here.

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