Is it time to panic? It’s always tough to live through sharp drops in the stock market. In times like this we typically remind you of the safer components of your portfolio being available to fund your life. Namely your cash and bonds act as a buffer to give us the time to not be a forced seller of stocks when they are down (guessing you’ve heard us say that once or 100 times before). But what does it mean when the bonds are down too?
The short answer is that the bond basket will continue to protect against extreme moves down in the stocks. The bonds you own going forward will have higher interest rates and therefore better long term returns, because as bonds mature inside that basket they get reinvested at higher yields. It takes a little time for the higher rates to filter through the bond basket, but they still should be thought of as a safe alternative to your stocks.
In the video below Rene provides some context around the current headlines, the drop in the stock market, and revisits the overall gameplan.