My wife gets AARP’s magazine. It is a mag for people at or near retirement age that has interesting and sometimes misleading articles meant to inform the graying generation. Occasionally there are articles that appear to be written by corporate interests looking to further their own ends. This month’s magazine includes an article, “Future Wealth, Why Bonds Are Still a Good Bet”.

This article suggests that if you re-invest your bond dividends in the bond market as it collapses, your money is buying into bonds that are worth more. Therefore you will do well in the long term. This is the “dollar cost averaging” theory proposed when stocks fall. By continuing to buy into a fallin market, you will eventually buy in at the bottom and make money when the market rises.

But think. If you know that a market is collapsin, why would you hold? Is it a good idea to hold and watch your position lose 30% of its value? How about selling your entire position (or half or 80%) and waiting for the market to drop and turn around. There are risks either way and you will often hear people say, “do not try to time the market”. There is no doubt that the bond market will collapse as interest rates rise which they must do.

It is smart IMO to sell you bond positions now. Move it into a money market fund, CD, or perhaps even the stock market (which should be coming off a sharp decline).

I believe AARP’s bond article is misleading. It will provide cover for the lazy or directionless “investor”; allowing them to feel good about doing nothing as interest rates rise. Me? I sold out of our bond mutual funds months ago.

If you have read through this and do not have a clue, educate yourself. The stock and bond market is the major vehicle for wealth creation in the U.S. It can also be a quick trip to the poor house without some knowledge and/or guidance.

Good Luck, we all many need it. Our government seems incapable of regulating the banks and investment houses. It was the repeal of the glass seagall regulations created in the 1930’s that led to the recent market collapse.

Ron