Why Would Anyone Buy Long-Term Bonds with Low Yields?

General Discussions Forum
1

Hey folks…

I’m new to investing, so this might be a bit of a basic question, but I’m really struggling to understand something.

Why would anyone buy a long-term bond—say a 25-year bond—that only pays 5% interest? I mean, sure, you get $50 a year for 25 years, but with inflation, that $50 is going to lose so much value over time. In 10-15 years, it might only be worth $30 in today’s dollars. And the principal you get back at the end of the 25 years would also be way less valuable, right? Like $650 in today’s dollars?

What am I missing here? Why do people invest in these kinds of bonds? :blush: :blush: :blush:
Thanks in advance…

1 Like
2

your risk profile changes as you get older.

When I’m 70 and sitting on $5m (and no longer employable) I’ll be in a different position than when I’m 25 with $2500 with my career in front of me.

I want growth when I’m younger. I want stability and guarantees as I get older.

3

Bonds offer a unique investment advantage. Unlike cash, which loses value due to inflation, bonds protect your initial investment while providing steady returns.

4

Maybe because it’s less risk than equities and they also provide better returns than cash.