Q&A With Gordon Pape: After a Substantial Loss, Is it Time to Get Out of Bonds?
No one can say with certainty where interest rates will go from here but the consensus seems to be that they are at or near their peak. Photo: Hero Images Inc/Getty Images
In this Q&A, a reader asks financial expert Gordon Pape whether his father should get out of bonds after suffering a 20 per cent loss over the last three years.
Q – My 80-year-old father has a decent chunk of his investments in a non-registered account with a robo-advisor, in their conservative portfolio (30% equity/70% fixed). The bond holdings have tanked over 20% since he started investing with them in summer 2020. Thankfully, my father is not dependent on these investments to meet his day-to-day expenses.
It’s been suggested he should get out of bonds, but this would result in significant capital loss and also of course eliminate the opportunity to recoup his bond fund losses over the months/years ahead. Do you think he should just stay the course and wait this out? – Neil P.
A – No one can say with certainty where interest rates will go from here but the consensus seems to be that they are at or near their peak. Once they start to decline, bond price will rebound, and your dad will start to recover some of his losses. Selling now would be a bad move. – G.P.
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