A Financial Adviser’s Test

               

Want a quick test of someone who considers himself a financial guru? Ask about buying bonds with the threat of inflation. When he starts talking TIPS, (for inflation-protected Treasury bonds) without asking how long you intend to hold the bonds, he has flunked the first step.

                                           

Then ask him to fully explain the duration principle behind the purchase of bonds. And how the usage of duration can overcome the effects of inflation. Chances are he will flub that too. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)