A popular investment strategy for an investor seeking a predictable cash flow is bond laddering. Bond laddering is in essence building a portfolio of bonds with staggered maturity dates. For example, the portfolio can consist of bonds maturing in three, five, seven and ten years. You can think of each bond’s maturity as a different rung on the ladder.
There are always things happening to unnerve markets and cause volatility, from changes in commerce, to politics, to economic outcomes and corporate actions. Volatility is an investment term for when a market or security experiences swings in either direction, up or down, that deviate from the norm. If the price stays relatively stable, the security has low volatility. A highly volatile security hits new highs and lows quickly, moves erratically, and has rapid increases and dramatic falls.
It's widely known that the return you earn is a function of the risk you take. Higher risk equals higher return. Lower risk equals lower return. But what is high and what is low? How do we determine a high return vs. A low return? That is heavily influenced by prevailing market conditions.
One of the most overlooked features of a bond is a make-whole call provision but one can be forgiven for this because rarely does an issuer exercise this option. But however rare it is, it does happen. Just recently Macy’s (the famous retail store in the U.S) used this provision to early redeem its 8.375% 2025 secured bond on August 17th. So, what is a make-whole call feature and how does it work and or differ from a standard call provision?
In the investment world, the terms credit, credit risk and credit quality are repeatedly used when speaking about different asset classes, investment types and issuers of debt. But what do these terms mean and how should they factor into our investment making decisions?
If you don’t know where you are going how will you get there? Many of us have an idea of where we want to be financially or a specific goal in mind we would like to achieve. However, if you start without a goal and then try to create a plan, there is a great probability you’ll get nowhere. First you must determine what your goal is, create timelines to get there, then plan your course of action? Many of us have goals we would like to fulfill; be it higher education, a new car, a first home or even a dream vacation.
Bonds are fixed-income investments that many investors use for a steady stream of income, especially during retirement. When buying a bond there are two critical numbers that you will encounter- the coupon rate and the yield. It is important to understand the difference between these two numbers, what they represent and why they are important.
Real estate is a popular component of most investment portfolios. Indeed, it is important to own one’s home and many investors use it as a store of value. In many cases, "mature” investors seek to purchase starter homes for their children or grandchildren a means of passing wealth across generations. There is always temptation to purchase these properties using “cash” or “equity” i.e., to give their children a property that is free and clear of debt. However, very rarely are these investors considering the opportunity cost of the funds they use to purchase the property.
“Fed Taper” talk is in the air again, well at least the talking about talking about phase which can be interpreted to mean that the U.S. Federal Reserve Bank (the Fed) is merely considering tapering rather than seriously deciding to do anything about it. But what is “tapering”, when is the Fed likely to begin and what are the implications for markets, if any?
What is tapering?
