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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: $Mogul who wrote (82404)	6/4/2007 1:00:49 PM
From: Tommaso	Respond to of 110194

>>>If you own the bonds outright and paln to own to maturity you will be fine.<<< It's not quite that straightforward if you own a 30-year bond. First, you have to live 30 more years. Second, if inflation over the next 30 years is equal to that of the past thirty years, you would lose 75% of your purchasing power. Third, if you only collected a 5% coupon over that period (the current rate), you would have collected 150% of your principal, and if you reinvested that at going rates you might increase that to 300%. So you might end up with a nominal $4,000 for every $1,000 invested now. But inflation would cut that right back to $1,000 in constant dollars. So would you break even? Not unless you had the bond in an IRA. Taxes would eat up a lot of that "gain." So it would be OK in an IRA? Well, if what you are aiming at is 0% growth of your assets, you might be fine. Most people hope for more.