What is a stripped bond?

July 7, 2024 No Comments

A: The quick answer to this question is that a stripped bond is a bond that has had its main components broken up into a zero-coupon bond and a series of coupons. To help explain one, let’s first describe a bond. A bond is a

What kind of securities should a risk-averse investor buy?

July 7, 2024 No Comments

A: While most investors are focused on investment options with high rates of return, some individuals are more concerned with the level of risk inherent to specific investment allocations. Investors who are risk-averse are more apt to choose the investment that presents a lower degree

What are the main advantages of fixed income securities?

July 7, 2024 No Comments

A: Fixed income securities are commonly used to diversify an investor’s portfolio, as they reduce the overall risk of an asset allocation or investment strategy weighted heavily in the stock market. Fixed income securities such as corporate bonds, government bonds, preferred company stocks and certificates

What are the pros and cons of operating on a balanced-budget?

July 7, 2024 No Comments

A: Few issues are more complicated, contentious and controversial in contemporary American politics than balancing the federal government’s budget. Those who argue in favor of a balanced budget offer many claims about the deleterious impacts of huge federal debt. Others counter that balanced budgets would

What are the risks associated with investing in a treasury bond?

July 7, 2024 No Comments

A: It’s common for financial analysts and investment publications to refer to U.S. Treasury bonds (T-bonds) as risk-free investments. This designation is approximately true and, at the same time, misleading. Thanks to the Federal Reserves’ implicit backing of all Treasury Department obligations, there is virtually

What are the risks of investing in a bond?

July 7, 2024 No Comments

A: The most well-known risk in the bond market is interest rate risk – the risk that bond prices will fall as interest rates rise. By buying a bond, the bondholder has committed to receiving a fixed rate of return for a set period. Should the market

What assets are taxable and what assets are not taxable?

July 7, 2024 No Comments

A: Most types of income are taxable by the Internal Revenue Service (IRS). In fact, all income is taxable unless it is specifically mentioned in the Internal Revenue Code as not taxable. Some examples of taxable income include gains from stock accounts, real estate capital

What determines bond prices on the open market?

July 7, 2024 No Comments

A: One of the most basic concepts that investors should become familiar with is how bonds are priced. Bonds do not trade like stocks. The pricing mechanisms that cause changes in the bond market are not nearly as intuitive as seeing a stock or mutual

What does a negative bond yield mean?

July 7, 2024 No Comments

A: If a bond has a negative yield, it means the bondholder loses money on the investment, though this is relatively unusual. Whether a bond has a negative yield largely depends on the type of yield being calculated. Depending on the purposes of the calculation,

What does investment grade mean?

July 7, 2024 No Comments

A: Credit ratings provide a useful measure for comparing fixed-income securities, such as bonds, bills and notes. Most companies are issued a rating based on their financial strength, future prospects and past history. Companies that have manageable levels of debt, good earnings potential and a

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