Do We Still Need Bonds In Our Portfolio (Part 2)
Bonds are core element of any financial plan to invest and grow wealth. Most bonds pay a steady stream of interest returns at periodic intervals over its duration (similar to bank fixed deposit) and hence offer investors a regular stream of income.
Bond investors will get back their principal amount at maturity if there is no default. This is an assurance that you cant get from equities. After you invest into an equity, you will not know when you will get your principal back.
Bonds is an important asset class for investors' portfolio in addition to stocks to ensure that investment risks are diversified appropriately.
Default risk of bonds can be easily reduced by investing into investment grade bonds. According to Moody's, in the last 70 years, the average default rate of 3 years investment grade credit has been less than 1% compared to non-investment grade default rate of over 10%.
Leveraged Investment Grade bonds gives returns similar to that of High Yield without adding credit risk. To find out more about leverage investment grade bonds, go to:
myasiaprivatebank.blogspot.sg/2016/12/use-money-to-grow-more-money-using-bonds.html?m=1
I have investors telling me that they do not want to invest in bonds anymore because bonds are risky in an interest rate rising environment. If you do not buy bonds, most probably the portfolio is fully invested into equities. In my view, the risk is much higher!
The increase in USD interest rates is good news for bond investors. Simple: higher the interest rates, higher the bond returns.
True, there would be short term adjustment pain, but that can be taken care of by implementing portfolio laddering strategy & buying bonds that have coupon reset feature.
Portfolio ladder strategy simply means dividing your money among bonds with different maturities, primarily short to intermediate to long.
Ladder strategy has been written in the link below: myasiaprivatebank.blogspot.sg/2016/10/two-strategies-to-manage-bond-portfolio.html?m=1
Bonds with coupon reset feature has been mentioned in these links:
a) myasiaprivatebank.blogspot.sg/2016/12/list-of-sgd-bonds-with-coupon-reset.html?m=1
b) myasiaprivatebank.blogspot.sg/2016/11/hsbc-coco-perpetual-bond.html?m=1
In an increasing interest rate environment, the coupons and sale proceeds get re-invested at increasingly higher yields!
To read "Do we still need bonds in our portfolio (Part 1)", go to: myasiaprivatebank.blogspot.sg/2016/11/do-we-still-need-bonds-in-our-portfolio.html?m=1
Bond investors will get back their principal amount at maturity if there is no default. This is an assurance that you cant get from equities. After you invest into an equity, you will not know when you will get your principal back.
Bonds is an important asset class for investors' portfolio in addition to stocks to ensure that investment risks are diversified appropriately.
Default risk of bonds can be easily reduced by investing into investment grade bonds. According to Moody's, in the last 70 years, the average default rate of 3 years investment grade credit has been less than 1% compared to non-investment grade default rate of over 10%.
Leveraged Investment Grade bonds gives returns similar to that of High Yield without adding credit risk. To find out more about leverage investment grade bonds, go to:
myasiaprivatebank.blogspot.sg/2016/12/use-money-to-grow-more-money-using-bonds.html?m=1
I have investors telling me that they do not want to invest in bonds anymore because bonds are risky in an interest rate rising environment. If you do not buy bonds, most probably the portfolio is fully invested into equities. In my view, the risk is much higher!
The increase in USD interest rates is good news for bond investors. Simple: higher the interest rates, higher the bond returns.
True, there would be short term adjustment pain, but that can be taken care of by implementing portfolio laddering strategy & buying bonds that have coupon reset feature.
Portfolio ladder strategy simply means dividing your money among bonds with different maturities, primarily short to intermediate to long.
Ladder strategy has been written in the link below: myasiaprivatebank.blogspot.sg/2016/10/two-strategies-to-manage-bond-portfolio.html?m=1
Bonds with coupon reset feature has been mentioned in these links:
a) myasiaprivatebank.blogspot.sg/2016/12/list-of-sgd-bonds-with-coupon-reset.html?m=1
b) myasiaprivatebank.blogspot.sg/2016/11/hsbc-coco-perpetual-bond.html?m=1
In an increasing interest rate environment, the coupons and sale proceeds get re-invested at increasingly higher yields!
To read "Do we still need bonds in our portfolio (Part 1)", go to: myasiaprivatebank.blogspot.sg/2016/11/do-we-still-need-bonds-in-our-portfolio.html?m=1
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