Tomczyk warns about bond route

Says investors will take hit when Fed eases up on easing; 'not defying gravity'
JAN 27, 2013
Fred Tomczyk, chief executive of TD Ameritrade, is worried about the bond bubble. Mr. Tomczyk mentioned his concerns Thursday to the brokerage's advisers at TD's annual conference in San Diego. At the same time, the company's retail division, which services do-it-yourself investors, sent a warning to customers about bonds. The article, entitled "Bonds Are Not Gravity Defying: Be Prepared," discusses risks with both bonds and bond funds, including ETFs. “Interest rates will rise and bond prices will ease. When exactly? No one knows for sure,” the article says. “By how much? That's not clear either. All the more reason for fixed-income investors to pay attention.” “Too many people think [bonds] are like a CD — they put in $100,000 and they've always got $100,000,” Mr. Tomczyk said in an interview. But when rates go up, investors will see losses on their statements, he said. “I'm worried about it. People tend to come back [after a loss] and say, 'You didn't tell me.'” Many people have been stretching for yield, he added. Mr. Tomczyk isn't sure how many bonds TD retail clients own. They tend to prefer stocks, he said. TD Ameritrade Institutional's advisers are “much more savvy” about bonds than the average do-it-yourself investor, he added. The TD chief doesn't see short-term rates rising for several more years, but long term rates could be another matter if the Federal Reserve eases off its bond-buying program in response to a recovering housing market.

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