The only thing certain about the future is that some things will change and some will remain the same. Anonymous
If you have followed the bond market for a long time then you are prepared for volatility.
If you are new to the bond market then, before you act, gather and analyze historical bond market data.
In recent past years there was a great deal of volatility in the government bond market related to the sovereign debt crisis, where countries faced the prospect of bankruptcy. Bets were placed. How did that work out? Who lost money in the bond market and why? Until you understand how and why perhaps you should not be making an significant moves into the bond market.
What is rational behavior in the current market, with the U.S. Fed preparing the public for months (years?) for an interest rate hike . . while European central banks appear to be heading in the opposite direction? How will money be moving into and out of sovereign debt funds?
And what of China, where inflation appeared poised to move up wildly, only to be followed by a plethora of news about China’s growth dramatically slowing and threatening the world economy? Commodity markets, in consequence, have tumbled to earth.
What is rational in this economy is not to panic but to know your investment, know a good bit about history – the interplay of your investment choice and market forces – and to understand how values moved over time.
Remember in 2008 the Dow Jones industrial average broke 7,000, diving to about 6500? People panicked and sold. Some stayed on the sidelines. Others bought. The Dow is above 17,000.
Do your due diligence. Speak to a bond professional. Ready everything you can, even if you feel compelled to read it as fast as you can. That’s okay. At least you’re doing your best to NOT INVEST EMOTIONALLY. Read. Discuss. Sleep on it. Talk to your financial or investment professional. Sleep on it. Really, the mind works best when it has time to digest and is well rested.
Trust me on this: the worst investment decisions I have made were the product of a rush to judgment.