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…

 

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…

 

Retail Investors Have Mixed Opinions on Fixed-Income “Bubble”

Since the financial crisis of 2008, central banks around the globe have been working to jumpstart economies and stock markets. The main tool has been “quantitative easing” or QE–a monetary policy of purchasing government securities or other securities from the market in order to lower interest rates and increase the money supply. While the US…

 

Common Investor Mistakes & Other Insights from John Bogle

This week’s AAII Weekly Digest highlights these “must-read” AAII articles:   The Mutual Fund Cash Dilemma Should fund managers let cash build in the absence of opportunities, or should they remain fully invested at all times? While most mutual fund managers are required to stay invested, some have the flexibility to raise their cash allocations,…

 

9 Rules for Better Stock Investing

This week’s AAII Weekly Digest highlights these “must-read” AAII articles: Why Value Beats Growth: A Brief Explanation The various characteristics of stocks that generate higher returns than what the capital asset pricing model (CAPM) would predict are known as “stock market anomalies.” Two of the most famous anomalies are size and value. This article sets out…

 

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…