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Investments: Analysis and Management, 12th Edition by Charles P. Jones

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chapter 18

Bonds: Analysis and Strategy

As you think about managing your inheritance, you may change your mind about the 40 percent bonds and convince yourself that at your age you should only be interested in equities. However, you also realize that it would be smart to at least learn something now about including and managing bonds in your portfolio. After all, you are familiar enough with sharp stock market declines, such as the ones in 2000–2002 and 2008, to understand that there are times you may wish not to have all your inheritance invested in stocks. Furthermore, you may have heard about the strong performance by bonds in recent years. And you now understand the importance of asset allocation and diversification. Once you learn some key principals about managing bonds, you will be in a much better position to evaluate recommendations from brokers, financial advisors and others as to what you should buy and hold in your portfolio.

Chapter 18 concludes Part V on fixed-income securities by analyzing strategies and approaches to the management of a bond portfolio. We consider why investors buy bonds as well as the issues an investor should consider in managing a bond portfolio. Some basic strategies available to a bond investor are discussed. Investors must also grapple with the overall strategy issue of whether to be active or passive in their investment approach.

AFTER READING THIS CHAPTER YOU WILL BE ABLE TO:

  • Analyze the reasons why investors buy bonds.
  • Differentiate between ...

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