You CAN Lose With Bonds

Big losses in the stock market can send investors scurrying for “safe” investments. But what is a “safe” investment? Stocks are risky because stock prices go up and down all the time—sometimes wildly so—and if you have money invested in stocks, the value of your original investment can drop substantially. In contrast, many investors put…

 

The Basics of Real Estate Investment Trusts (REITs)

This week’s AAII Weekly Digest highlights these “must-read” AAII articles:   A Look Back at History: Lessons From the Financial Crisis Three columns that provide a flashback to the last bear market and contain lessons that are still very valid today. Looking back over time, the stock market has been a very good investment, outperforming…

 

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…

 

A Dividend Approach to Judging the Value of Stocks

This week’s AAII Weekly Digest highlights these “must-read” AAII articles:   The Effect of Dividend Changes on Expected Cash Flows Dividend announcements and changes are perceived as signaling information about a company’s financial prospects. However, new research points to a link between dividend announcements and future changes in cash flow volatility. A Dividend Approach to…

 

How to Buy Individual Bonds: A Fixed-Income Toolkit

Once you’ve learned about bond basics and reviewed the vast number of bond choices, you’re ready to make decisions on how to invest your funds in bonds. Basically, you have two choices: You can purchase individual bonds, or buy them packaged together as funds. Both choices offer certain advantages. The most compelling reason to buy…

 

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…

 

Screening for Dividend Income

This week’s AAII Weekly Digest highlights these “must-read” AAII articles:   Reinvesting Dividends The approach used in managing AAII’s Dividend Investing portfolio is to allocate proceeds received from dividend payments to cash. The cash, along with any proceeds from the sale of holdings in excess of the average size of all DI holdings, is then…

 

Central Banks Seen as Biggest Obstacle Facing Fixed-Income Investors

The low-interest rate environment of the last several years has forced many investors to seek alternative forms of investment yield beyond traditional fixed-income instruments Faced with that reality, we posed the following question to our readers last week: What is the biggest obstacle facing fixed-income investors right now? Here are the results: As of 7:30…

 

Why Buy Bonds If Interest Rates Will Rise?

This week’s AAII Weekly Digest highlights these “must-read” AAII articles:` Bond Pricing Made Simple Many investors know that a bondholder receives periodic interest payments from the bond issuer and that principal is usually not due until the bond matures. But when asked to explain the difference between coupon and yield, or what the risk of a…

 

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…