Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back, David.
David Nelson:
Thank you very much.
Brandy Auterson-Hurst:
So interest rates have been a primary subject this year, but it isn’t always just the level of rates. What other measures do you look at to assess markets?
David Nelson:
Good point. When it comes to bonds, it’s a little different than stocks. I think stocks are pretty straightforward from the standpoint of people understanding. But when you talk about bonds, there’s different quality of bonds and different variables that come into play. Typically, the starting spot is a 10-year government bond, and the big driver there is just interest rate risk, which is what we’ve experienced over the last year and a half, two years. Today we’re going to talk about … we’re going to add a little something to this, and that’s going to be more of a lesser quality bond, high yielding type bonds.
So the chart that I brought along today is basically illustrating here the yield spread, and it’s kind of looking at the difference between a 10-year government bond and what you can get in a higher yielding bond. And we’re talking about … the terminology is a junk bond or a high yielding bond, kind of the same. These are from corporations and the corporations that aren’t as probably reliable, if you will, as far as from the standpoint of comparing to the U.S. government. But many of these bonds are worth individuals considering. And what the chart is illustrating, it’s shown on the far right-hand side there, that rates have come down. And as far as for people looking for yield, this is a pretty good opportunity as far as they may want to take a peek at.
Brandy Auterson-Hurst:
So what message do you think investors should be taking away from this data?
David Nelson:
Don’t just focus solely on high quality bonds. There’s other opportunities. They have additional type of risks, but if you understand the risk and you can live with some of that, you can pick up quite a bit as far as … in yield.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcitiescom.
Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.