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Sunday, January 11, 2015

Are bonds a safe investment? Not according to veteran investment specialist

Ian Williams advises against investing in bonds, says gold a far better option

For more than 300 years, bonds have been one of the safest investment options available. No longer, according to Ian Williams, veteran investment specialist and Chief Executive Officer of Charteris Treasury Portfolio Managers. Why? Because bonds have been enjoying a bull run for the last 40 years, one which he predicts will end soon "with interest rates set to rise and lower oil prices boosting growth."

According to Williams, "Bonds are a highly-dangerous asset class" and carry extremely asymmetric risk as compared to the possible reward. In an email statement, he referred to the yields of UK government bonds, currently at their lowest since first launched in 1703. Williams adds, "Buying any asset at 300-year highs carries huge risks."

The 62-year-old Williams believes in 40-year cycles. And as the cycle for bonds is near its end, he has not only launched a special fund that will see higher payments as interest rates increase, but he has turned his attention to gold and silver, saying that they are set to become some of the best performing assets.

Of his new New Strategic Bond Fund, Williams says, "the expectation is that this fund will be in the one percent that does not lose capital when the bear market in bonds begins." And according to him, "If our 40-year cycle analysis is correct, that bear market is not very far away."

This trend is sure to be further accentuated in Europe where government debt has become a proportionately larger share of the GDP. As a result, bonds from some countries like France and Italy are no longer an attractive investment option, since they offer lower returns while the risk that the governments might renege on their debts is growing.

Interestingly, the yield rates on French and Italian bonds dropped to all-time lows amid rumors that the European Central Bank is planning to buy bonds to reduce deflation and bolster growth. The rate for French 10-year bonds went down as low as 0.718 percent while 5-year Italian bonds were knocked down to 0.781 per cent.

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photo credit: LendingMemo via photopin cc

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