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Investment Strategy For Fixed Income Bonds
When it comes to investing into fixed income bonds, investors can adopt a variety of investment strategies. However, do not take up investment strategies for fixed income bonds without first checking whether those strategies are suited to your financial goals and needs. |
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Here are some investment strategies for fixed income bonds that you can adopt as long as they suit your circumstances:
- Bond laddering is an important investment strategy as it spreads the maturity period of the various bonds over many years. This way you will be assured of getting regular income for years to come while diversifying your portfolio and protecting your investment from price fluctuation and changes in the market interest rate. One good example of bond laddering is having say Bond A that matures on December 2009 with a maturity value of $20,000, Bond B matures in August 2010 with a maturity value of $20,000, Bond C matures in August 2011 with a maturity value of $20,000 and Bond D matures in September 2012 with a maturity value of $20,000. Therefore, you total investment is $80,000 but you will be earning different interest rates based on the rate specified by each issuer in all years.
- Bond swapping is another investment strategy for fixed income bonds. Usually bonds are not traded by investors as they are used to generate fixed income and/or reduce the volatility of the investment portfolio. Usually investors buy bonds and hold onto to them until they mature or called by the issuer. In bond swapping, the entire portfolio of the existing bond is sold and the money generate from this sale is then used to buy other bonds. However, this strategy depends on the person's financial goals and appetite for risk. A bond swap should only be done if it helps the overall investment portfolio and the money generated from the sale more than covers the cost of the transactions.
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Bond Market:
Fixed Income Bonds
 Fixed income bonds are those bonds that pay a fixed interest to the investor. These bonds also repay the principal when the bond matures. Fixed income bonds are perfect for those investors who are looking for regular and fixed income that could further add to their earnings. More..
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