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While you and I worry about our stock portfolio businesses are cashing in on the booming market of corporate bonds with interest rates at historic lows getting cheap debt is a boom for businesses.
But what about -- the retail investors looking to increase our portfolios.
For some answers we turn to -- to -- CEO of diversified financial and he's joining us now from Florida thank you sir I understand you're on vacation appreciate -- being here.
-- Jerry how are you.
I would probably don't I wouldn't talk a little bit about -- corporate bond market because it's getting a lot of coverage in the trade press in the Wall Street Journal it's going nuts crazy is corporations just.
Feast on is cheap debt does that mean that for individual investors it's a good time to buy corporate bonds.
I think I think it's it -- they certainly had some of their portfolio in corporate bonds.
I think more than ever they need to be careful about where you go and corporate bond market you know they look at alternatives -- money markets and CDs and bank rates.
The rates there are really horrible so that stretching out and they buying corporate debt it's not -- terrible time to buy corporate debt they got to be extremely care.
Now -- -- he told us that there are a lot of advisors out there they're really hot -- high yield debt as a corporate jet where you know the credits are -- -- frankly the guys borrowing the money.
So they have to pay a little more for it so the return for investors is -- looks better -- do you think that can be really risky in this market why.
It exactly right -- and the reason particularly it's because they're showing.
Past track record that we went through the recession in 2008.
And those kinds of bonds just got rack it was told the 3040 -- defense and about it 2009 it was a pretty substantial recovery.
So if you look at some of these high yield mutual funds they have twelve and eighteen month return 6040 and 50%.
You have brokers that there'd be showing each track records that customers and on what I would -- -- correct it well the cheap money he's already been made that easy pickings already happened.
You are not gonna see that kind of return going forward were important.
Some of the good debt that's being -- is being kind of mixed in there with a bad back.
And you're not really getting paid for our risks are OK -- -- -- are dominant.
Grade point down -- I appreciate that what's the sweet spot for individual investors that -- -- in the bond market to make money.
I -- this is not going to be exciting and I know people are really going to be jumping up and down.
But you can get into that investment grade corporate level.
These are relatively short term maturities that lead under ten years and at five -- ten year period.
You can get 34%.
I know this is not exciting but -- that -- nice reasonable place to do it.
I know it's not exciting.
And do it in a mutual funds -- -- -- low low cost mutual -- -- diversified portfolio let's talk about that a little bit because I think people are confused about how to -- -- the easiest way to do it courses to go to.
One of the big -- mutual fund companies with.
With low rates people who charging very little for these spots and we're saying is the sweet spot is that short term but not super short.
And again we're talking about corporate bonds.
We'll look for when I'm shopping great corporate bonds and what do I look for when I'm shopping -- mutual fund families for the right fun.
Well that it you certainly can run Morningstar reports and see what the track record of these things -- that how long the managers in Iraq involved.
And what the expense ratio is off but the typical companies have been -- the fidelity that that hero prices all of them have very good -- in this space.
The key is that you have a diversified portfolio somebody's budget seven -- a billion dollars in life so when you -- -- five and 50000 dollars.
You're really diversifying the purple area.
All right one final question we don't have a lot of time but I am interested in what you had to say about inflation protected securities.
These are things that are sold by the federal government they're supposed to.
Protect you with inflation rises this is another thing that financial advisors have been pounding the table about because it was conventional wisdom that we're gonna see higher interest rates it hasn't happened.
Is that a good thing to -- now.
Well that's exactly or the point pitchers they actually -- looking because normally what happens when you -- and -- a recession.
You start to get the momentum and GDP growth which we have not seen.
And with it increased inflation -- these bonds -- treasury bonds issued by the United States government.
And they have a -- Relation -- -- -- inflation gets worse.
You actually have your waiter returns are increase in these bonds will we have gotten no inflation -- big sponsors have not been a particularly good place to -- -- right Dominick thanks for your without taking place have a great vacation we appreciate it.
Back to Jerry you have a great day.
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