Poet or Sailor?

The oceans have been around for a long time, stretching out to foreign lands and calling us to explore. At the same time calling us to explore all those hidden and forbidden places with in ourselves. As we look out over the horizon and deep into the water are we not looking deep into our own soul? Are they the same?

Is it the poet or the sailor in us that asks that question?

As I start to yield to this call and consider taking the journey, a voice within fearfully asks, do I really want to see what I will find, do I have the courage to choose to look? What will I find…infinity?

It is tough to be out on the water and not be a sailor and a poet for the water brings our soul to the surface only to have us contemplate its depths and ask…….

Am I on my true path; am I charting the course truly meant for me; am I paddling in the direction of the current; all toward that distant land that we can not see?

Are we paddling our financial ship in the direction of the current, are we paddling her in the direction of our financial hopes and dreams? Some may not.

Let’s take a look…

Warning - tighten your seatbelt for a bit, rougher waters dead ahead

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If you were asked to choose between receiving $102 or $103 a year from now, which would you choose? $103 because it is more money.

Ok, if you were to give someone $100 today and had a choice of getting back $102 or $103 a year from now, which would you choose? Again $103.

So if interest rates are at 2%, and you buy a bond fund. You would, in affect, give them $100 now and lock in the right to sell your bond fund at the end of the year for $102.

Now lets say the day after you buy this bond fund, interest rates go up to 3%. Anyone can now buy a bond fund that will give $103 at the end of the year, why would they buy your bond for $100 that has locked in 2%? They wouldn’t.

They would pay you less than $100 dollars for your bond fund so that the return will be 3% not 2%.
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That is why, in a period of rising interest rates, you do not want to own a bond fund or bonds in a balanced mutual fund. Every time interest rates to up, the value of what you own goes down.

Well I hope you got all that.

Let’s move on, we can come back to this as we have lots of important fish to fry.