Many people are afraid to purchase bonds because they are concerned about interest rates. They are afraid that if rates move up in the future, they might miss out on the better return. While “buyer’s remorse” may be understandable when buying shoes, bonds often play an important part in a well-balanced income producing portfolio, so don’t let FOMO (Fear Of Missing Out) direct your investment decisions.
For people who live in Israel and have U.S. brokerage accounts, though, there is another question that actually may be a little more practical:
What time of day should you buy bonds?
When you live in Israel, the best time to actually purchase the bonds is during the afternoon, when the United States markets are open. Since bonds don’t trade with the same level of liquidity as stocks, you often have to shop around carefully to find the type of bond that you would like and purchase it right away before someone else grabs it. If you were buying stocks, you can pretty much be assured that there will always be more available. But this is not so with fixed income (“fixed income” is a term often used to refer to bonds). Regular followers of my column know I don’t advocate “timing the market” – but time is of essence in buying bonds.
What’s the best way to buy bonds?
Once you’ve decided that you want to own individual bonds in your portfolio, select the criteria that are most important to you. For example, consider whether you want short-, medium-, or long-term bonds. Decide on the credit rating. Think about the type of industries in which you would like to invest. Let your investment advisor know what you’re thinking so that he can shop for the bonds when the market opens and you will be ready to make a decision. Otherwise, you might find yourself disappointed when you select a specific bond but find out that someone else has bought it, and there is no secondary market for it.
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Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published January 11, 2016.