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NewsMaterial3 min readDisconfirmAI Editorial

Ben Carlson: Why He Bought Bonds for the First Time in His Life Only in Middle Age

American investment blogger Ben Carlson explains in his blog his complete reasoning for buying bonds for the first time in his career: starting yields largely determine expected returns, duration determines the magnitude of price impact from interest rate fluctuations, and life stage determines risk budget. He clearly distinguishes between 'allocating bonds' and 'predicting market direction'.

2026-10-22 22:41 GMT+8

Ben Carlson wrote on his blog "A Wealth of Common Sense" that a reader, aged 38 with all assets in broad-based index funds, asked him: "I recently heard you bought bonds for the first time in your career; how did you decide which type to buy?" His answer was not "because interest rates are going to fall," but rather a complete line of reasoning extending from duration sensitivity to starting yields to life-stage risk budgets.

Duration is the core concept of this article. Carlson explains that duration is essentially interest rate sensitivity—a bond with a duration of 5 years will see its price drop by approximately 5% for every 1 percentage point rise in interest rates; conversely, if interest rates fall by 1 percentage point, the price will rise by approximately 5%. He gives an example that the U.S. long-term Treasury ETF (TLT) currently has a duration of about 15 years, meaning a 1 percentage point rise in interest rates would result in a price loss of approximately 15%. "I don't like guessing interest rate trends," he wrote, "I prefer holding intermediate-to-short term durations of 5 to 6 years or shorter."

Behind this choice lies a principle he repeatedly emphasizes: only bear volatility when paid a risk premium. The volatility of long-term Treasuries is too large, so holding them is essentially speculating on the direction of interest rates rather than collecting fixed income. Intermediate-to-short term bonds provide a relatively certain source of return—"collecting interest"—while keeping the price impact caused by interest rate changes within an acceptable range.

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So why now? The direct reason Carlson gives is the starting yield. "Bond returns tend to track starting bond yields," he wrote, "Expected returns for bonds are higher than they have been at any time since Apple released its first iPhone." For the past twenty years—from the ultra-low interest rates after the U.S. financial crisis to further suppression during the pandemic—fixed income provided almost no decent income. Now yields have returned to their highest levels since 2007, changing the math.

But he simultaneously incorporates personal life stage into the decision. "I am also at a different stage in my life; I am middle-aged, and my goals are different." He bought some tax-efficient bonds for his brokerage account, which might be used for vacations, home renovations, ammunition for the next stock market downturn, or simply to "collect 5.5% interest and be happy." He still holds significant equity risk in both his retirement accounts and his brokerage account.

Finally, he clearly defines what he is NOT doing: "This is not predicting a stock market crash; the bull market could certainly continue. This is not predicting an interest rate collapse; if inflation remains sticky, the U.S. government continues spending, and AI capital expenditures soar, bond yields could absolutely continue to rise." He admits that if interest rates rise, his bond prices will fall in the short term, but believes that the current higher yields offer a "margin of safety" that hasn't existed for some time—and if interest rates do continue to rise, it means that once the dust settles, expected returns will be even higher.

"Or maybe I'm just getting old and boring," he wrote, "but either way, bond yields look attractive for the first time in a long time."

Sources

  • awealthofcommonsense.comA Wealth of Common Sense↗
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