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The Power of Words

A name or title doesn't always tell the whole story. Whether it's about the Dutch or about bonds, terms can be misunderstood.

(Prato Capital)

What does everyone think of when they hear Holland or Dutch?

Is Holland a country? Is Dutch a language or a nationality?

Many think of Holland as a country in Europe that is famous for tulips, windmills, cheese, wooden clogs, and enthusiastic football (soccer) fans. But Holland is not a country at all, just 2 provinces, North Holland and South Holland, in the country of the Netherlands. There are actually 12 provinces in the Netherlands.

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Why are citizens of the Netherlands called Dutch and not “Netherlanders”? Only English-speaking countries refer to the citizens of the Netherlands as Dutch. This started centuries ago when the English referred to anyone who spoke a Germanic language as Deutsch or Dutch. Eventually the citizens from Germany were called Germans but the citizens from the Netherlands were still referred to as Dutch. Even the German and Swiss immigrants that settled in Pennsylvania in the 18th century were referred to as ‘Dutch’ due to the language they spoke and not the country they were emigrating from.

With many of these terms having different meanings, the easy one is the official language of the Netherlands. It is Dutch.

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Words can have different meanings and sometimes they can be misleading.

How misleading can the term ‘Bonds’ be?

Many investors assume bonds are risk free and a stable part of a balanced and diversified portfolio. This is a misleading assumption and is not necessarily true. There are some degrees of risk associated with all types of investments, including bonds. There are generally two types of risk to bonds – interest rate risk and credit risk. With interest rate risk, bond prices are directly related to interest rates. As interest rates rise, generally bonds decrease in value and the Federal Reserve has indicated that rates will probably rise sometime during 2022 or 2023. Credit risk is associated with the credit ratings for companies and the possibility of default on the bond.

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