Tuesday, December 23, 2014

Why Bother with Bonds

Title: Why Bother with Bonds
Author: Rick Van Ness
Genre: Non-fiction
Published: 2014
Rating: 7/10

Review: This book is a bit off-the-beaten path for me if you consider my reviewing history on the blog. I generally don't read too many financial books (or really financial anything) because it causes me to fall asleep -- one second I was there, and next thing you know I am curling up next to my cat and closing my eyes.

Also, I got this book for the worst possible reason: it was free. Unfortunately, it seems like the promotion is done now and it's $5.99 on Amazon Kindle right now. Yet, even if I got it for the wrong reason, I decided to actually give it a chance and read it.

Generally, it's a pretty basic introduction to bonds. The answer to the question in the title is a bit naive and much-reiterated through the book: stocks are risky, you can lose lots of money on stocks, put some of your money into bonds instead. I was hoping he would address the fact that current bond yields are below the inflation and he does mention it -- but I wouldn't say that he addresses the problem really.

On the other hand, I thought he did a pretty good job explaining the financial concepts in the book. He explains various terminology, how bonds are priced, their yield, what duration means, and how to choose what to buy. Generally speaking, if you agree with his premise that you need to play it safe and diversify away from stock market, I think following his advice on which bonds to buy makes a lot of sense. He promotes either buying Treasury Notes directly, investing in a low operating cost mutual fund that tracks a bond index, or building a bond ladder.

He also mentions bogleheads.com website and forum, which I find has a lot of interesting investing information. Generally speaking, this is a pretty good hands-on practical manual for understanding the basics of how bonds work and picking bonds. On the other hand, you could probably find all of this information online easily -- the value is mostly in organization of the information and accessible reading style. I would recommend it for novices, but I think anyone who has done this research before would find the book a bit slow and repetitive.

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