It is always a hot question to ask whether to have stocks or bonds. A strong economy is always bad for bonds, according to Carla Fried of CNN Money. The long term interest rate rose up to 1.3 points in five months and the bond funds dropped for more than 4% in the same period. So, it is better to cut back on bonds, in 2014.
New strategy
With the improvement in the economy, higher yielding bonds are no longer attractive. It is good to take a little risk to have a great return, in such an economy. The high quality bonds are more compelling than they were, a year ago.
What is the best move?
The bonds that are supposed to mature in less than three years are losing the value, due to inflation. However, the bonds which mature in more than a decade, have generated, more value. However, if the rate increases significantly in 2014, then the value of the 10 year bond would also decrease. It is important to measure the sensitivity and the duration of the investment, to create a good balance portfolio. Many experts suggest that people should minimize exposure to bonds, in 2014. It is a good time to put in a little more risk, to get high returns.