Insight – Why would anyone in their right mind buy Government Bonds with negative yield?!
- Yields are low and negative due to central banks' efforts to spur on the economic growth
- There are still buyers of assets with negative yield, such as institutional investors
- Government bonds are a liquid asset held instead of cash or other assets with risk for decrease in value, such as stocks in a bear market
- Government Bonds make up 55% of the All Seasons Portfolio, and at the bottom, I summarize my ETFs
Soon, I have one full year’s history of the All Seasons Portfolio since starting in December last year with my first investment. I have come a long way since, starting from zero and now having accumulated a portfolio valued at EUR 3,700 in only 11 months. The main takeaway, which you should adopt, is to be disciplined and to continuously set aside an amount every month to invest. That will quickly accumulate, and you will also have that money working for you with compound interest.
As I already mentioned in the relevant blog post, in November, I made an addition on the Long-Term Government Bond part of the portfolio. This time, I purchased the iShares $ Treasury Bond 20+yr UCITS ETF USD (Dist) (EUR).
When posting about buying government bond ETFs during this first year, one particular question has always been brought up. It is a very valid question considering the current market conditions with low and negative interest rates. Why should you include government bonds in the portfolio, who in their right mind buys and holds bonds with negative interest and why do they do so?
