Step 8: Riskese
The Term Risk Factor Fixed income is also an important component to an investment portfolio. Since stocks and bonds frequently move in opposite directions, holding low-volatility bonds provides good diversification and will therefore level out a portfolioâ€™s performance by dampening stock volatility and providing short-term liquidity. The â€œterm (maturity) risk factorâ€? refers to the difference in returns between long-term government bonds and short-term treasury bills. Longer-term bonds are riskier than shorter-term instruments and have yielded higher returns over the 86 years ending in 2013. Figure 8-10 shows six different fixed income allocations and their differences in risk and return. Figure 8-10
Published on Jun 1, 2015
This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with i...