Stop Buying Crypto & Stocks, Trade These Instead.

Every mom and pop investor seems to be diving into crypto and stocks, but this asset class is just as profitable with much less risk.

Boring, low-profit, and illiquid. Misnomers for the largest and most active financial market on the globe. Bonds. That’s right, bonds. Now, more than ever bonds are offering many bespoke trading opportunities with above-average returns for the financially-savvy investor.

To start off, let’s examine a wealth management strategy straight from Wall Street.

The Bond Ladder

A bond ladder is a strategy in which the portfolio manager fills a portfolio with bonds of different maturities. For example, a bond ladder may look like a portfolio with 1 year T-Mobile bonds, 5 year Coca-Cola bonds, and 10-year Apple bonds. This strategy allows you to be diversified while still generating income every year.

But aren’t bond yields lower than ever? Yes, but it depends on where you look.

It is true that U.S. treasury bonds are paying an all-time low yield. However, this is not true for the corporate bond market. Corporate bonds are just bonds that are issued by companies, rather than a state or federal agency. Since these bonds lack the relative risk-freeness of treasury bonds, they often have to pay higher yields to attract more investment. However, keeping with microeconomic theory, as the yield increases, so does the risk.

Bonds use a letter-grade credit rating system where each letter denotes the bond’s ability to fully pay out an investor. Using S&P Global’s rating system, you see that the safer the bond, the higher the credit rating.

Currently, junk bonds (<BBB) have a default rate of about 7%. A bond default means that you likely won’t see your principal or interest again. However, even BBB, the lowest investment-grade tranche, currently has a 0.3% default rate.[1]