Would You Invest in Long Term Bonds

I do not feel that now is a good time to invest in long-term bonds. The reason is this – the value of long-term bonds decreases as interest rates increase. As this looks like an increasing interest rate environment, long-term bonds look like they would come with an opportunity cost. Short-term bonds would be a better investment in this environment..
There is a Federal Reserve rate increase expected this week, but that has already been priced into the bond market (Robb, 2017). The idea of the Fed increase is that it will place a constraint on economic growth, in which case the current economic expansion will continue "at a steady pace without overheating" (Robb, 2017). Indeed, the Fed has already cautioned that if the market does not respond with slowing conditions that "All else equal, an easing of financial conditions may warrant a somewhat steeper policy rate path." (Robb, 2017). Thus, the current condition is that rates are going to increase, but they will likely have to increase again, and perhaps at a faster rate than is currently built into long-term bond prices.
There is, however, the question of whether or not a new tax plan will be passed, and given how poorly conceived it apparently is, whether that would create an economic boom as its backers hope or whether it would create negative economic conditions as all rational analysis indicates. That would probably lead more towards a collapse in economic growth, which would mean that rates are reduced. The impact of changes to the tax code would take some time to materialize, however, meaning that even if one believed current fiscal policy is going to harm the economy, that the time to buy long-term bonds is probably further down the road when rates are higher, and those higher rates can be locked in for the long-run.
Overall, the analysis that is available now, in absence of speculation about potential fiscal policy changes and their impacts, says that we are currently in an increasing rate environment, which is a bad time to buy long-term bonds.

Self-Reflection
I think that learning about financial concepts will in general be valuable. The biggest takeaway might not even be in the details of what I learned about things like bonds and mutual funds, but rather in learning about how to analyze investments as a whole. One needs to take time to learn about these things, in the sense that financial decisions require a degree of expertise and rational analysis. If one does not take time to analyze investments, then there is the risk of making rash, emotion-driven decisions.
For example, it might seem like a genius plan to get into Bitcoin right now, because of the run it is on. Intuitively, you can say that Bitcoin has no intrinsic value and that clearly it is in a bubble, but a lot of people would just see its recent run without taking into consideration the volatility, the fit of that volatility into their portfolio and investing needs, and make a rational decision. If you are not making a rational decision, you are prone to making poor decisions. A poor decision can still pay off handsomely, without question, but at the end of the day it makes more sense to undertake sober analysis of investments, in order to ensure that you are making the right choice. There's nothing wrong with gambling on something, if that fits within your financial needs and your means to handle taking a huge loss.
For me, I think that is the biggest takeaway, something that will influence my decision-making about personal finance. But I can also see how learning how to think this way will have a positive influence on my career as well. I can see each step of my career, each move that I make as a strategic investment. There are going to be times when taking more risk will pay off – like maybe starting a business – but there are going to be times when sitting back, thinking about all of the angles, and analyzing whether I'm making a wise decision will lead to me making smarter choices. Knowing when to take a risk and when not to, and how to evaluate risk – that is a way of thinking to which I have now been exposed and that I think I will put into practice in a lot of my life endeavors.



References

Hayes, D. (2017). Bond basics tutorial. Investopedia. Retrieved December 11, 2017 from https://www.investopedia.com/university/bonds/bonds3.asp

Robb, G. (2017). Here's why the Fed will hike interest rates on Wednesday. Marketwatch. Retrieved December 11, 2017 from https://www.marketwatch.com/story/heres-why-the-fed-will-hike-interest-rates-2017-12-11