CHAPTER 10 Bond Strategies

Bond investment strategies usually are described as being either passive or active. However, I prefer the dichotomy to be “passive” or “aggressive” to focus attention on managerial intent rather than frequency of trading. Some passive strategies—for instance, tracking the performance of some published bond index or targeting a preset rate of return over a known investment horizon—require active trading to rebalance the portfolio. Trades in a passively managed bond fund are about “needs” and not “wants.”

In contrast, an aggressively managed bond portfolio seeks to maximize the rate of return, typically over a given time period. For example, a fixed-income mutual fund manager focuses on changes in net asset value, ...

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