Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
to know that they are very widely held. (Remember that they are not marketable, meaning that they cannot be traded in public.) The latest indications are that the Treasury Department is working on improving savings bonds returns in an effort to attract more investors. A conservative bond portfolio is no doubt a diversified one, but it will consist of only the highest quality bonds.
Investment grade (BBB and higher rated) corporate and municipal bonds offer a great opportunity for the moderate bond investor. A diversified portfolio of long- and short-term bonds with varying degrees of quality is perhaps the best approach to build and maintain a moderate investment strategy. A moderate investor may also be involved in trading bonds, however the number of trades are kept at a minimum and investments are held for long periods before they may be sold in the market.
The speculator is active in junk bonds and trades them frequently. Low quality junk bonds offer high interest rates (thus cheap prices) and have associated market price volatility, making them ideal candidates for risk-takers to either earn a high interest on their principal (accepting the risk of default) or trade them in the hopes of catching a favorable price movement. Speculators rarely have a diversified portfolio, although they may invest in several low quality bonds from different market segments or with varying quality ratings. The speculator may lose some or all of his investment. …
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