In a recent column I reported on a survey done by the financial services company HBSC that found only 59% of US parents intend to leave their children an inheritance, the lowest of the 15 nations in the survey. The fact the US is last came as no surprise to me. What did surprise me was that 59% seemed high.
My average client is someone who has saved over one million dollars. I am guessing that less than 2% of them have any intention or goal of constraining their current lifestyle in order to maximize their kids’ inheritance. Consuming their last penny of savings about the time they take that last breath is their spending plan of choice. There is even a name for these folks: “Die Brokers.”
via Rick Kahler: Even Die Brokers Intend To Leave Money To Kids | Wealth Planning and Management | Kahler Finanical Group.
A common misconception is that bond funds are more exposed to interest-rate risk than laddered individual bond portfolios. The truth is that they have identical exposure.
The logic for the standard view basically starts and ends with the observation that an investor can hold individual bonds to maturity while bond funds don’t necessarily hold all bonds until they mature. Most bond fund managers trade their assets periodically.
Because you can hold individual bonds until they come due, as the conventional logic goes, it doesn’t matter if their prices go up or down in the interim. But if you compare laddered individual bond portfolios and bond funds with similar-maturity holdings, you run virtually the same risk if rates change. Yet the incorrect viewpoint is all too common and can lead investors to take excessive interest rate risk in individual bond portfolios without understanding the implications.
via What’s safer: Individual bonds or funds?.