Financial Myth #1: If Interest Rates Rise, Bonds Will Lose Money
Stay Wealthy Retirement Podcast
Taylor Schulte, CFP®
2.4 • 606 Ratings
🗓️ 12 November 2019
⏱️ 12 minutes
🧾️ Download transcript
Summary
Interest rates are at record low levels.
The bond market in an almost 40-year year bull market.
It's very possible you have heard some version of the following statement:
"If (or when) interest rates rise, bonds will lose money."
If you're a listener of this retirement podcast, you might know that it’s not entirely incorrect.
Bonds and interest rates do have an inverse relationship.
But it's complex.
Learn what really happens to a long-term bond portfolio if we enter a rising interest rate environment.
The answer may surprise you!
For all the links and resources mentioned in this episode, visit www.youstaywealthy.com/57
DISCLAIMER: This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services
Transcript
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| 0:00.0 | Welcome to the Stay Wealthy podcast. I'm your host Taylor Schulte, and today I'm starting a four-part mini-series to finish off the year. |
| 0:14.7 | I'm starting to work on our content calendar for 2020 in an effort to take this show to the next level and make it better than ever. So |
| 0:22.3 | in between now and the end of the year, I will be publishing four many podcast episodes |
| 0:27.8 | busting some common myths in the investing and financial planning world. But before we dive in, |
| 0:33.4 | I just want to take a quick moment to say thank you. This podcast, this show grew 10fold this |
| 0:39.4 | year. We went from this small little hyperlocal San Diego-based podcast to this national |
| 0:44.4 | podcast that broke the top 200 in the iTunes business category earlier this year. It's just crazy |
| 0:50.5 | to just say that out loud. And I know it sounds kind of cliche, but I really, really could |
| 0:55.1 | not have done it without you, the listener, your emails, your reviews, your questions, comments, |
| 1:01.2 | feedback, everything. That's what really keeps me coming back. Every time I think about hitting |
| 1:05.6 | the pause button on this podcast, I just, I hear from one of you that gives me the motivation |
| 1:09.7 | that I need to just keep going. |
| 1:11.7 | So thank you. Thank you for your support. And more importantly, thank you for being a part of this |
| 1:16.6 | community. As always, you can find the links and resources mentioned in this episode by going |
| 1:22.2 | to you staywealthy.com forward slash 57. |
| 1:35.8 | Okay, so the first myth that I'm busting is extremely timing given the current environment. With interest rates at record low levels and the bond market in this almost 40-year |
| 1:41.2 | pool market, we often hear some version of the following. If or when |
| 1:47.0 | interest rates rise, bonds will lose money. Now, if you've heard this or you've repeated some |
| 1:54.1 | version of that statement, you might know that it's not entirely incorrect. Bonds and interest |
| 1:59.7 | rates do have an inverse relationship. In other words, |
| 2:04.0 | when interest rates rise, bond prices fall and vice versa. Hence why bonds have been in this bull market |
| 2:11.2 | since the 1980s when the Fed funds rate hit 16%. Yes, you could buy bonds in the 1980s with double digit yields. However, |
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