Page 183



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 portfolio’s performance by dampening stock volatility and providing short-term liquidity. The “term (maturity) risk factor� 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

Index Funds: The 12-Step Recovery Program for Active Investors  

This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with i...

Read more
Read more
Similar to
Popular now
Just for you