The Intelligent Investor's Almanac
Your Bi-Weekly Guide to Markets, Movements, & Money.
Presented By Ken Majmudar & Ridgewood Investments
Issue 11 • August 01 to August 15, 2025
Never miss another valuable edition of The Intelligent Investor's Almanac again.
Your TL;DR Institutional Intelligence
- Planning Insight:Current bond yields offer an opportunity to strengthen portfolio income while maintaining a balanced approach to risk.
- Action Step: Assess whether your fixed‑income holdings align with your long‑term goals, and consider gradually incorporating high‑quality bonds or ETFs.
Wealth Preservation:New Savings Opportunity for Children: ‘Trump Accounts’ provide a new tax‑advantaged vehicle with added government contributions for newborn children.
- Strategic Response:Fixed Income allocations could complement existing portfolios, and reduce risk to equity portfolios; the exact rules and regulations on ‘Trump Accounts’ are still evolving.
The Value Investor
Ken Majmudar, CFA & Founder of Ridgewood Investments
“Instead of chasing returns, bonds should serve as a financial tool, protecting capital and delivering dependable income” – Bill Gross (PIMCO co‑founder & “Bond King”)
Periods of higher interest rates create challenges for individuals relying on borrowed capital, but they also bring opportunity for investors seeking reliable income and stability. Today’s fixed‑income landscape is offering yields in the 4%–6% range on many high‑quality bonds, a level we haven’t consistently seen in over a decade. For individuals approaching or already in retirement, this environment provides a chance to lock in meaningful income while maintaining a balanced, diversified portfolio.
At the same time, newly announced savings programs like Trump Accounts in the United States create opportunities to build long‑term wealth for children. While several details await IRS guidance, these accounts are designed to combine tax advantages with the potential for compounding from an early age, helping parents set a foundation for children’s future education, housing, or entrepreneurial goals within a structured, low‑cost framework.
At Ridgewood, we are closely monitoring these developments so we can guide families on how, and when, such accounts may best support their broader planning goals.
Fixed Income: A Cornerstone of a Balanced Retirement Portfolio
At Ridgewood, we view fixed income as a supporting element in a diversified portfolio, offering dependable cash flows, preserving capital, and reducing overall portfolio risk through market cycles.
Understanding Bonds and Bond Returns
When you invest in bonds, whether directly or through bond‑focused ETFs, you’re essentially lending money to a government or business in exchange for regular interest payments. The yield on these investments reflects the return you earn relative to the amount you originally lent.
When interest rates rise, new bonds pay higher yields, but the price of existing bonds tends to fall. This is why 2022–2023 was challenging for bondholders: a sharp, sustained rise in interest rates during 2022–23 weighed heavily on bond prices.
However, this shift has opened up stronger income opportunities for investors. Today, yields on many U.S. Treasuries and investment‑grade bonds are yielding in the 4%–6% range, creating a good opportunity for more substantial real returns in a higher‑rate environment. Looking ahead, there is a possibility that fixed‑income investments may benefit if interest rates begin to decline. We’ve seen this dynamic before. In prior periods such as 2001 and 2008, the Federal Reserve slashed interest rates aggressively (the Fed’s policy rate dropped from about 6.5% to 1.75% in 2001, and from 4.25% to near 0% in 2008).
To put it simply:
Yield = Your return per dollar invested. For instance, a bond ETF yielding ~4% translates to about $4 of interest annually for every $100 invested.
In addition to yield, two critical factors in bond investing are maturity and duration:
Maturity is when the bond repays its full principal. Bonds can have short (1–3 years), intermediate (3–10 years), or long (10+ years) maturities. Generally, longer maturities offer higher yields, but they also carry more interest rate risk as well as price volatility of the underlying bond prior to maturity.
Duration measures a bond’s sensitivity to interest rate changes. Think of it like a bond’s “interest rate risk meter.” The higher the duration, the more the bond’s price will drop if rates rise — and the more it will gain if rates fall. For example, a bond with a duration of 7 years will fall ~7% if interest rates rise 1%, all else equal.
Why This Matters Now
In today’s environment:
Short-duration bonds offer attractive yields (4%–5%) with less interest rate risk that may be value additive for conservative income seekers.
Longer-duration bonds may be more volatile but offer the potential for higher current yield and greater price appreciation if interest rates fall in the coming quarters or years. In addition, several types of bond structures allow you to lock fixed interest income till maturity.
Fixed Income’s Role in Portfolio Construction
For most investors, and especially those nearing or in retirement, fixed income serves several key purposes:
Income Generation: High‑quality bonds provide steady interest payments, creating a reliable cash flow stream, especially valuable for retirees.
Diversification: Bonds typically have low correlation with stocks, helping reduce overall portfolio volatility. When equities fall, high‑quality bonds typically hold value or even rise, helping steady overall portfolio performance.
Capital Preservation: Investment‑grade bonds, particularly U.S. Treasuries are far less volatile than stocks and return principal at maturity, helping protect your capital in volatile markets.
Tactical Flexibility: Bonds act as a reserve of capital. In downturns, they hold value, allowing investors to rebalance and buy stocks at attractive prices without disrupting their long‑term plan increasing optionality to take advantage of downturns.
During the equity market volatility of April and May 2025, bond allocations in many Ridgewood client portfolios helped steady overall portfolio performance. This reflects the role of diversification, when equities declined, high‑quality bonds helped limit overall portfolio fluctuations.
What About Bond ETFs?
Bond ETFs make it easier to gain diversified exposure to fixed income. Examples include the Bloomberg U.S. Aggregate Bond Index (average duration ~6–7 years, yields around 4.2%–4.4%).
However there’s no one‑size‑fits‑all:
Credit quality varies: Bond ETFs can hold ultra‑safe Treasuries, investment‑grade corporates, municipalities, or high‑yield bonds. Higher‑quality bonds are steadier with lower income; lower‑rated bonds pay more but add credit and price risk.
Costs and liquidity differ: Broad‑market bond ETFs are typically low‑cost (under 0.05% annually) and trade easily throughout the day. Niche or actively managed bond funds may charge more and trade less frequently.
At Ridgewood, we combine analysis of yield, maturity, and duration to tailor your bond strategy. Short-term bonds for stability, longer-term bonds for upside potential — or a mix of both for a balance.
Trump Accounts: A New Savings Option for Families
The new legislation, H.R. 1, commonly referred to as the ‘One Big Beautiful Bill’ introduces Trump Accounts, a new category of savings accounts designed to help families secure their children’s future.
With Trump Accounts, families have a new Federally approved nationwide tool to save for their children’s biggest milestones while also receiving valuable tax benefits.
Investor Brad Gerstner called this a chance to “make every kid a true owner in the upside of America,” noting that fewer than 5% of children today have investment accounts, most belonging to already affluent families.
How They Work
Eligibility: Available for U.S. citizens under 18 with a Social Security number.
Government contribution: Children born between January 1, 2025, and December 31, 2028 are eligible for a one-time $1,000 Treasury deposit, which the government may deposit automatically depending on future implementation guidance.
Annual contributions: Parents, relatives, or the child can add up to $5,000 per year, with an additional $2,500 from employers excluded from taxable income.
For children born before January 1, 2025: Contributions of up to $5,000 annually per child can also be made by parents, relatives, friends, or corporations.
Contribution cutoff: Contributions can’t be made after the child turns 18.
Investments: Limited to low‑cost index‑tracking mutual funds or ETFs, with fees not exceeding 0.1%.
Withdrawals & Tax Rules
Before age 18: Withdrawals are not allowed.
After age 18: Accounts function like an IRA, allowing withdrawals for eligible purposes, including higher education and first-time home purchases (up to $10,000). Other uses like small business expenses, natural disaster recovery, or birth/adoption costs may be possible, but may incur taxes and penalties unless exempted in future IRS guidance.
Important Note: Several aspects of the Trump Accounts require further clarification from the IRS. These include how and when the government will open accounts if parents don’t, how employer and public-sector contributions will be reported, and whether nontraditional uses like small business or adoption costs will qualify for penalty-free withdrawals. Clarification is also needed on compliance standards for eligible investments and the handling of excess contributions.
Here’s to building lasting wealth,
Ken Majmudar, CFA
Founder & Chief Investment Officer Ridgewood Investments
P.S. If you’re ready to explore how our institutional-grade investment approach can work for your portfolio, let’s schedule a time to talk below.
Gain Industry – Level Intelligence For Your Investment Strategy
Transform your approach to wealth building with institutional-grade insights. Schedule a private discovery call with Ken and the Ridgewood team to:
- Analyze your current portfolio positioning
- Explore sophisticated investment opportunities
- Design your personalized wealth architecture
Building generational wealth requires institutional-grade thinking. Let’s discuss how our sophisticated approach can work for your family’s future.
Important Disclosure: Ridgewood Investments is a registered investment adviser. This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results.
