In this episode, Mark talks about valuation issues of the market, investor behavior, compound interest and rate of return. What is the yield and the return? Many investors do not understand how bonds actually work. When you get a bond you don’t get that money back until the bond hits maturity. The interest rates fluctuates, so the value of your bond does as well. How long until the bond matures, what is the interest rate you are receiving? When interest rates go up the value of bonds is going to go down depending on the maturity - you should not focus on yield and short term rate of return. Focus on total return: the combo of both. Many investors aren’t willing to be invested long enough in order to take advantage of compound interest. They focus on the movement of a stock, not the reasons why they own it. The ability for the investor to understand their emotional predisposition to making decisions based on emotions is important.
May 22, 2017