Modeling Bond Returns After Rate Shocks

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In this episode of The Investing for Beginners Podcast, Dave and Andrew bring back David Stein—author, co-founder of AssetCamp, and host of Money for the Rest of Us—to demystify bonds. 

David also breaks down the difference between investment-grade and high-yield bonds, how spreads signal fear (or complacency) in the economy, and why today’s higher yields make bonds more interesting than many investors realize.

Finally, they discuss practical ways to own bonds—ETFs, bullet ETFs, TIPS, and CLOs—and how to think about your allocation as you get closer to retirement.

Key Topics Covered:

• What bonds are, how they work, and why the bond market is so big

• How rising interest rates push bond prices down (and vice versa)

• Investment-grade vs. non-investment-grade (high-yield) bonds and default risk

• How bond spreads signal fear, recession risk, and investor sentiment

• Using bonds for near-term goals like a house down payment vs. long-term retirement

Timestamps:

00:00 Intro and welcoming back David Stein

01:00 What are bonds and how do they differ from stocks?

03:00 How coupon rates, yields, and maturities work in practice

13:00 High-yield bonds, spreads, and what they tell you about recession risk

18:00 Defaults, diversification, and why most investors use bond ETFs

25:00 Using bonds for house down payments and near-term goals

29:00 How rising rates crushed bonds in 2022—and what that means going forward

33:00 Yield to maturity and duration: the two numbers that matter most

37:00 Modeling bond returns and recovering from price drops over time

41:00 Why valuations in stocks vs. math in bonds can change your allocation

44:00 Final thoughts on bonds as a tool for confidence and stability

Resources Mentioned:

Money for the Rest of Us (David Stein’s podcast)

AssetCamp (institutional-grade research tool)

Have questions for David? Email him at team@moneyfortherestofus.com

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Remember, invest with a margin of safety—emphasis on the safety. Have a great week, and we’ll talk to you next time.

Timestamps are generated by artificial intelligence, and are not 100% accurate depending on the platform used for listening.

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