Chapter 10

Banking on Bonds

In This Chapter

arrow Understanding bonds and their role in your investments

arrow Getting inside the risks

arrow Looking at different types of bonds

arrow Working through the figures

arrow Comparing individual bonds with bond funds

During the 1970s, 1980s and most of the 1990s, bonds were boring. Worse, they were guaranteed losers. They were no-hope purchases for no-hope purchasers. The only sensible investments during this time were equities. Shares in quoted companies made real gains even after the high inflation of much of this period. Even mediocre shares in boring companies earned their keep. It all had to do with something called the cult of the equity. Pension-fund managers, who controlled more and more of the stock market during the second half of the 20th century, bought shares with their members’ money. Their counterparts in the United States and Europe continued to buy bonds, but their performance didn’t compare with that of the UK management firms. Equities ruled.

But ...

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