Madison Mountaineering clients Helen ÒCokieÓ Berenyi, Jonathan Eakes, Mary Lynne Capps and Krisli Melesk climb Illiniza Norte with guide Estalin Suarez Valladolid in Illinizas Ecological Reserve in Ecuador, on January 28, 2021.


One of the issues I have answered on my Perfect Day broadcast is this question: What frightens you the most right now in our given economy?

You can imagine all the different answers I have received. Last week, I listed a few but after the microphone was turned off, I stopped for a moment and thought: What scares me the most?

It’s probably not what you think. When I look at the economy and how life is going through many twists and turns right now, the one thing that frightens me the most for my investors is Bonds.

People watch the news, search the internet for advice, or talk with their well-meaning friends and get shaken and turn to Bonds and mutual funds. I’m just going to say it out loud: Bonds are ticking time bombs. Period. We could stop right here but let me give you the short answer to the question, “Why?”

When it comes to rates and bonds, the conventional wisdom is very easy to explain because rising rates are bad for bonds. In fact, when interest rates begin to go up, as they are beginning to do, bonds get hit. Their values will drop.

Most people assume all interest-bearing securities are completely risk free, but this is not the case. Even if you know a lot about investing, you may not be aware of some of the risks associated with bonds.

Lesson 101 on Bonds

The most important thing to consider is the interest rate. Every six to eight weeks, the Federal Reserve (the Fed) meets to evaluate the health of our economy. At each meeting, a decision is  made regarding interest rates.

So, if inflation rises as we are beginning to see, the Fed will raise interest rates to tighten the money supply. If inflation is moderate or contained, usually the rates remain the same or only change slightly. But if the economy slows down and inflation is contained or deflated, the Fed reduces interest rates to create a stimulus for economic growth. Do you see how you could become unsettled?

Anytime bonds are in play, you must consider the present and future interest rate levels because as interest rates increase, bond prices go down, and the opposite is also true. That’s why I say: Consider the risk factors surrounding bonds. I can show you how to do this along with pulling back the curtain on the entire bond subject.

You Need a Three-Year Bucket

The other thing that falls in my top two things that frighten me the most is not having a three-year bucket or plan in place. I discussed this recently on my podcast “What Investors Need to Know (NOW) or WINK.

I always advise clients to put this in place to guard against market events because if you have a funded three-year bucket, which is basically what you need to live for three years of withdrawals from your portfolio, then you are creating your own economy regardless of what is going on around you!

This means your lifestyle will not change even if the market sells off 30%. Your three-year bucket, if it is invested correctly, will be protected. Remember, there are always ways to make money, whether the markets are good or bad.

Finally, what is perfect in an imperfect world? Your happiness is never based on what is in your bank account. It is based on your core strength—your time with your family, loved ones, and even yourself. Money can take you to many places, but lasting happiness is not one. That is something that comes when you learn how to invest in yourself and those you know and care deeply about.

Let’s Find the Solution!

So, the solution to the problems we all face today are solvable. I work with clients so they have all they need for today and the future. Core happiness does not increase just because you have what you consider to be more than enough.

It comes when you have your values and investments in the right place. Call me today for a consult and let me know what frightens you the most. I’ll tell you one thing: I bet we can find a solution.

Also be sure to download a free copy of my book: The Liberated Investor and learn how to:

  • Lower the fees you’re paying
  • Be active and responsive with your investing instead of passive or reactionary
  • Respond to the market instead of sitting on the sidelines
  • Reduce the conflicts of interest between you and your broker
  • Make sure your advisor has your best interests at heart.