Risk Profiling is Wrong to Recommend Bonds Now

   All financial advisors have to go through the risk-profiling steps with their prospective clients. Typically, advisors will recommend bond funds for those risk-averse investors who want capital preservation. Similarly, bond funds are the default choice for investors in their retirement years, since they would not have enough time to recover from possible losses. Bonds are known to be capital guaranteed. This is a deadly belief without understanding how bond works. It might be detrimental advice to our elder folks and conservative investors at the current economic situation. I hope this article can explain the looming danger of this advice.It is often mentioned that bonds are capital guaranteed. But they failed to add in a caveat – capital guaranteed at maturity ONLY. Bond price will fluctuate between issuance and maturity, as shown in the chart above. An investor who holds the bond …Tagged as: BondsRead the full article ?