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    Investors: short-term rates and matured bonds

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    What should investors do when rates are increasing short-term and matured bonds?

    When rates are falling, long-term bonds will have capital gains from market price increases, so what would be a defensive strategy?

    While many investors may devise low risk strategies and strategies to mitigate risks, upheavals can catch even the most savvy flatfooted. Is a balanced portfolio is the answer to managing risks?

    © BrainMass Inc. brainmass.com September 29, 2022, 12:48 pm ad1c9bdddf
    https://brainmass.com/business/bond-valuation/investors-short-term-rates-matured-bonds-447136

    SOLUTION This solution is FREE courtesy of BrainMass!

    What should investors do when rates are increasing short-term and matured bonds?
    In this situation investors should buy the bonds because the price of the bond would be less than its par value and at the time of maturity the investor would get the par value amount. By doing this the investor will get a capital gain benefit.

    When rates are falling, long-term bonds will have capital gains from market price increases, so what would be a defensive strategy?
    In this situation the long term bond should be sold off for capital gain and the sales proceeds should be invested in some other investment vehicles and then start creating a ladder with buying bonds with different maturities.

    While many investors may devise low risk strategies and strategies to mitigate risks, upheavals can catch even the most savvy flatfooted. Is a balanced portfolio is the answer to managing risks?
    Balanced portfolio always minimizes risk as it diversifies the investment causing the risk to diversify away. Using low risk strategies gives less return to the investors whereas taking high risk can be extremely risky so its better to choose where an investor can get maximum return with lowest risk and this can only be achieved through balanced portfolio.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com September 29, 2022, 12:48 pm ad1c9bdddf>
    https://brainmass.com/business/bond-valuation/investors-short-term-rates-matured-bonds-447136

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