Shaping Up Your Bond Portfolio With Barbells and Ladders

A key to bond management is reducing both reinvestment rate risk and price risk. Two strategies allow for this—while keeping a passive portfolio management approach. Risks involved in bond investing can be measured using the duration concept: Duration provides a measure for reinvestment rate risk and price risk, and investors can minimize both of these…

 

Defining Yield: A Word of Many Meanings

The term “yield” is thrown about often by the financial press and others. The trouble is that yield has many different meanings and implications for investors. This article will try and sort out some of the major differences. It will not, however, attempt to present mathematically all of the possible yield calculations created by institutions…

 

Bond Analysis: The Concept of Duration

Bondholders can be hurt by a number of circumstances: the issuer may decide to redeem the bonds before the maturity date, the issuer may default or interest rates may fluctuate and reduce the overall return of the bonds to the investor. The first two risks, call risk and default risk, can be minimized by careful…

 

How Credit Ratings Affect Bond Valuations

There is widespread misunderstanding about what credit ratings really mean, and how they affect the returns that you earn and the overall riskiness of your portfolio. Investors generally rely on bond ratings to evaluate the credit quality of specific bonds. Credit ratings indicate on a scale of high to low the probability of default; that…

 

Bond Market Liquidity and Its Impact on Your Portfolio

There are many headlines warning investors about the next possible financial emergency—the lack of liquidity in the bond market. The meaning of liquidity and the essence of the problem are not obvious. The media tends to look at the bond market as a monolithic block with bond yields either rising or falling. However, there are…