Asset Allocation: Fixed Income

On 02/07/2011, in Asset Allocation, by Jordan Wilson

Fixed income is the second core asset class.

Here we can start to look at percentage allocations when investing.

Again, the investor profile will determine the appropriate amount to invest in fixed income.

Within the profile, the phase of one’s life cycle and the investor’s risk tolerance are keys.  

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Risk-Return in Asset Subclasses

On 01/31/2011, in Investment Strategies, by Jordan Wilson

Asset classes have general risk-return characteristics.

Cash is low risk, low return. Fixed income is riskier and has higher returns than cash. Common shares have the highest risk and expected return of the core asst classes.

But you need to exercise care when selecting investments within a specific asset class. There can be significant fluctuations in risk-return profiles between investment options in each class.

We will look at a few examples today.

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Acceptable and Unacceptable Assets

On 01/29/2011, in Investment Strategies, by Jordan Wilson

Once you have completed your investor profile, the next step is to determine acceptable investment options.

What asset classes and sub-classes to include in or exclude from your investment universe.

Your unique profile and risk tolerance should determine which assets to invest in.

Today I will offer a few thoughts on things you might consider.  

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Negative Yield Bonds

On 10/31/2010, in Fixed Income, by Jordan Wilson

This week, the U.S. government issued federal debt at a negative yield to maturity.

According to Reuters:

The U.S. Treasury Department on Monday sold securities that fetched a negative yield for the first time, implying investors are willing to pay the government to own its debt.

A historic and interesting event. One worth briefly discussing.

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Mutual Fund Categories

On 09/09/2010, in Mutual Funds, by Jordan Wilson

Today we will define a few common fund investment styles.

Later, we will review the risk-return profiles and investment uses for each category.

I have previously written about some of the asset classes listed below, so please refer to my earlier posts for greater detail on a specific style.

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Preferred Shares

On 07/28/2010, in Fixed Income, by Jordan Wilson

Today we will look at preferred shares.

Their characteristics and common variations that you will encounter in the investment world.

Although a type of equity, I shall write about preferred shares in the fixed income section. This is because the characteristics of preferreds make them more like debt than equity.

So what exactly is this hybrid asset that lies somewhere between debt and equity?

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Important Bond Features

On 07/26/2010, in Fixed Income, by Jordan Wilson

To date we have mainly considered bond examples using plain vanilla debt instruments.

That is, debt with a par value in the investor’s domestic currency, a fixed term to maturity, and a consistent coupon rate. But bonds may also vary from this simple structure. There may be features incorporated into the debt terms that affect the issue.

These features may significantly impact the debt issue and returns to investors.

Bond features are extremely important to bear in mind when investing in bonds.

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A Few More Bond Types

On 07/23/2010, in Fixed Income, by Jordan Wilson

As Types of Bond Issues was getting long, I separated out a few of the more interesting bonds.

While the previous post listed some common bonds, I do not think too many of you will invest in Certificates for Automobile Receivables or Collateral Trust Bonds.

However, if you do any fixed income investing, you will come across the instruments below.

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Types of Bond Issues

On 07/21/2010, in Fixed Income, by Jordan Wilson

Most of you will never directly invest in bonds, excluding perhaps government savings bonds.

Instead you will probably invest in bonds indirectly through mutual funds.

That is what I would likely recommend to most investors.

So why is it useful to learn a bit about individual bond terms and issues?

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Bonds, Notes and Debentures

On 07/19/2010, in Fixed Income, by Jordan Wilson

Today we will review longer term fixed income securities.

There is some differentiation in the way that people define these assets.

Many define a bond as a debt instrument that is secured against specific assets of the issuer. Bonds may also be seen as any debt exceeding 1 year in term to maturity.

I take a slightly different approach to defining bonds.

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