Daily Gains Letter

Treasury bills

Why Bonds and Treasuries Are the Worst Places to Park Your Retirement Fund

By for Daily Gains Letter | Mar 8, 2013

DL_Mar_8_2013_JohnWith the bull market celebrating its fifth anniversary and the Dow Jones Industrial Average reaching record levels (and erasing losses from the financial crisis), it’s not a surprise to see some investors questioning whether or not they’ve missed the boat.

For those who think they missed the recovery, it’s probably a little unnerving to consider the present market a bull market. While the markets may be performing well, the average American isn’t. Unemployment remains high, as does household debt. Gross domestic product (GDP) is essentially flat. And housing remains fragile.

Those that think they have missed out or don’t want to risk jumping back in at this late stage will have to be content with what they’re getting from the banks (0.5%) or with bonds (3.1%). Neither one is worth celebrating.

How did we get here?

In an effort to stem the economic slide of the U.S. housing collapse that first surfaced in 2005, the Federal Reserve unveiled three different rounds of quantitative easing (QE). Since 2008, the Federal Reserve has printed off trillions of dollars, and it continues to add to that number at a staggering rate each month.

But America isn’t alone. Central banks from around the world are flooding the markets with QE.

The extra dollars pumped into the economy are supposed to spur growth. But they also have the reverse effect, shrinking the buying power of each dollar, which is the driving force of inflation. While inflation is good for businesses and Wall Street, it’s bad news for interest rates and everyday Americans and their retirement funds.

If investors aren’t willing to take some of their … Read More