Fixed Income only?

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Aug 1, 2007 9:34 pm

I read Marilyn Cohen's (Envision Capital Management) column in Forbes yesterday and thought, "That's it! I'm going focus on fixed income investments for my cleints!" 


I live in a very small community where the primary goal of most folks who are approaching or entering retirement is principal preservation. They don't even know what mutual funds are and have been told repeatedly by our local "bonus annuity slangers" that people only LOSE money in the stock market.


Frankly, I'm sick of my phone ringing off the hook every time the market takes a dive after I've convinced them of the need to put at least a little bit of their money in growth and/or growth and income investments. I just want to tell them, "You know what, screw my trying to make money for you, I'm just going to "protect it" for you.


My question is this: Is it possible to successfully operate a business that is almost entirely fixed-income based? I realize there are a whole new set of risks with fixed income, but it would sure be nice to be able to say, "YES, your principle will be safe!"


Aug 1, 2007 10:00 pm

Diversify your business just like you would a client's account.  If you base your business all in bonds, it will SHOCK you when interest rates go up 1% and all the old ladies in your portfolio call you to find out why their bonds are trading at 85-90 cents on the dollar.  It doesn't matter how you explained it when you sold it.

Aug 1, 2007 10:21 pm

I know you're right, Ferris. Thanks.

Aug 2, 2007 1:45 pm

there are brokers who have built Huge books by buying bonds only(primarly munis). if bonds are held to maturity there is No Risk of losing principal. you attract the serious money from people and become a true specialist. and if client wants/needs equities outsource it in a sma. the one concern is the rips in bonds are not that great anymore.

Aug 7, 2007 11:12 pm

2 RIP

Aug 7, 2007 11:26 pm
Vin Diesel:

there are brokers who have built Huge books by buying bonds only(primarly munis). if bonds are held to maturity there is No Risk of losing principal. you attract the serious money from people and become a true specialist. and if client wants/needs equities outsource it in a sma. the one concern is the rips in bonds are not that great anymore.



Scary stupidity.

Aug 7, 2007 11:30 pm
Vin Diesel:

there are brokers who have built Huge books by buying bonds only(primarly munis). if bonds are held to maturity there is No Risk of losing principal. you attract the serious money from people and become a true specialist. and if client wants/needs equities outsource it in a sma. the one concern is the rips in bonds are not that great anymore.



One must never forget that the chief purpose of a financial advisor is to convert client assets to advisor assets as expeditiously as possible.


Do you think that Vin would think deeper than he does if he had been taught that the first letter of a sentence is to be capitalized?

Aug 7, 2007 11:31 pm

Scary indeed.  Imagine what else lies under that rock.


Devil'sAdvocate:
Vin Diesel:

there are brokers who have built Huge books by buying bonds only(primarly munis). if bonds are held to maturity there is No Risk of losing principal. you attract the serious money from people and become a true specialist. and if client wants/needs equities outsource it in a sma. the one concern is the rips in bonds are not that great anymore.



Scary stupidity.

Aug 8, 2007 12:11 am

Borker, you might also find a couple of good VAs to go along with your fixed income portfolio.  When clients call about the market dropping, you'll have some reassuring guarantees to discuss with them.