Why Invest In Bonds?
Investment grade bonds are generally an extremely low volatility investment if held for the longer term.
For example, if you hold a large cap investment grade rating issuer 10 year bond for the entire 10 years, and there is no default, then you will earn precisely the payment promised when the bond was issued.
This level of certainty is rare in other asset classes. If you hold the bond to maturity the cash flows will be entirely predictable.
Stocks virtually never have this same level of predictable cash flows because so much depends on earnings growth and dividend payouts and these can rise and fall by large amounts for a sustained period.
This is why bonds are particularly valuable for those with shorter time horizons.
Certainly bonds have a lower return in most historical periods, but investors are much less likely to endure a bad short term outcome with bonds than with equities.
Requirement to open a private bank account is SGD2mil. If you are looking for a private banker, send me a message using the "Contact Form" on the right, I can recommend my friends to you.
For example, if you hold a large cap investment grade rating issuer 10 year bond for the entire 10 years, and there is no default, then you will earn precisely the payment promised when the bond was issued.
This level of certainty is rare in other asset classes. If you hold the bond to maturity the cash flows will be entirely predictable.
Stocks virtually never have this same level of predictable cash flows because so much depends on earnings growth and dividend payouts and these can rise and fall by large amounts for a sustained period.
This is why bonds are particularly valuable for those with shorter time horizons.
Certainly bonds have a lower return in most historical periods, but investors are much less likely to endure a bad short term outcome with bonds than with equities.
Requirement to open a private bank account is SGD2mil. If you are looking for a private banker, send me a message using the "Contact Form" on the right, I can recommend my friends to you.
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