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Are high yield corporate bonds a good investment?
When it comes to investing, one has to carefully weigh their options and determine the best course of action for their specific financial goals. In terms of high yield corporate bonds, these can definitely be a good investment for some people, but it really depends on individual circumstances. I'llRead more
When it comes to investing, one has to carefully weigh their options and determine the best course of action for their specific financial goals. In terms of high yield corporate bonds, these can definitely be a good investment for some people, but it really depends on individual circumstances. I’ll use a personal experience to prove my point. I had had a friend who sought my opinion on how to diversify his stock portfolio. I suggested that he take into consideration investing in high yield corporate bonds after assessing his financial status and risk tolerance.
He was initially sceptical, but after conducting his own study and learning about the potential benefits, he made up his mind to try it. After a few years, my friend was very content with his choice of investments. In addition to receiving regular bond interest payments, he also saw an increase in the value of his bonds over time.
See lessOf course, this is just one example, and everyone’s experience will be different. It’s important to remember that high yield corporate bonds come with a higher level of risk compared to other types of bonds because the issuing companies are usually lower rated and have a higher likelihood of default. That being said, for those who are comfortable with taking on more risk in exchange for potentially higher returns, high yield corporate bonds can be a smart investment choice. As with any investment, it’s crucial to do your due diligence and carefully consider your financial goals before making a decision.
Who issue zero coupon bonds in India?
Zero coupon bonds are bonds that do not make periodic interest payments. Instead, they are sold at a deep discount from their face value, and the holder receives the full face value when the bond matures. Federal agencies, municipalities, financial institutions and corporations all issue zero couponRead more
Zero coupon bonds are bonds that do not make periodic interest payments. Instead, they are sold at a deep discount from their face value, and the holder receives the full face value when the bond matures. Federal agencies, municipalities, financial institutions and corporations all issue zero coupon bonds.
STRIPS (Separate Trading of Registered Interest and Principal of Securities) is one of the most popular types of zero coupon bonds. STRIPS are created by stripping the coupons off of an existing bond and selling them separately from the bond’s principal. This creates a zero coupon bond that pays no interest but is backed by the creditworthiness of the issuer.
Municipalities sometimes issue zero coupon bonds to finance long-term projects such as infrastructure improvements or school construction. These bonds are often called “”capital appreciation bonds”” because their price rises over time as they approach maturity. Investors in these bonds typically have a higher tolerance for risk, since there is no interest income to offset any potential losses if the municipality defaults on its obligations.
Corporations also occasionally issue zero coupon bonds, usually when they are trying to raise capital quickly without incurring too much debt. Because zero coupon bonds are sold at a deep discount, they can be an attractive option for companies that need to raise money quickly but don’t want to take on too much debt. However, these bonds are also considered high-risk because there is no interest income to cushion any potential losses if the company defaults.
Is it right time to invest in debt mutual funds?
Debt mutual funds are a great way to earn good returns in your 20's. In fact, their compounded annual rate of return is higher than equity mutual funds. The foremost reason is that they are less volatile as compared to equity mutual funds.As an investor, you should not be too concerned about the volRead more
Debt mutual funds are a great way to earn good returns in your 20’s. In fact, their compounded annual rate of return is higher than equity mutual funds. The foremost reason is that they are less volatile as compared to equity mutual funds.As an investor, you should not be too concerned about the volatility of debt mutual funds as they are performing adequately with low risk taking limits. This can be checked through the fund’s risk parameters and the tenor (debt maturity) of the scheme.However, it is important for you to check on the duration that your debt schemes have taken so that you yourself know how long you will require to repay the principal amount.Short-term debt instruments have a high degree of risk associated with them which may lead to default if there was a deterioration in economic conditions or expectations resulting from external factors like an oil price shock or currency crisis among others. An increase in inflation would also affect consumer confidence which could result in severe fall in demand and consequently reduce competitiveness and raise input prices thereby increasing costs and hurting margins further leading to reduced revenues, increased working capital requirements and hence increased interest burden (higher borrowings) which would lead us into another spiral of increased cost, lower revenues and higher interest burdens etcete
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