Bonds are another essential tool for any investor's toolbox. Roger Nusbaum for Random Roger's Big Picture offers some tips on how to watch the bond market:
- Look at bonds from the long-term, big picture view.
- Yields work opposite to price, when the yield is low, as it has been for several years, the price is high and vice versa.
- When rates are low, it's generally better to avoid risk.
- Watch out for inverted yield curves; they indicate something is off in the bond market.
- When yields are low, shortening maturity reduces risk.
- Limiting exposure to emerging markets or high-yield debt can reduce risk.
- Watch credit spreads. In general, when spreads are wider, the yield advantage should be larger.
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