Bonds investment that everyone should understand.
Yield on bonds
Niuniu, as one of the immortal beasts, has seen too many tragic deeds of taking money and losing money. In the bond market, there are also many investment men who close their eyes and spend money, rely on "solid wealth", "do charity" at will, and slowly lose money when they invest.
In view of this, Niuniu decided to play the role of God of Wealth to protect everyone's income. Today, let's talk about where the bond returns come from, and here we have to mention the three swordsmen of bond returns-interest income, spreads and reinvestment.
01 coupon rate: bonds never bully honest people
The firm face value, coupon rate and maturity date from the beginning of the issue constitute the most basic interest income of the bond.
A formula that has been learned in primary school.
Generally speaking, the higher the coupon, the higher the bond yield, and vice versa.
Friends who are not sensitive to the market, buy bonds and stick it out. If you can't control the situation, don't be tempted away by products that seem to yield better returns.
02 time value: the reward of long-term affection
The saying "time is money" can be memorized by kindergarten children, but who really understands the value of time?
In the bond market, the value of time is really reflected in the form of money, the truth is so naked, I don't know if you feel the magic of the capital market.
A formula that has been learned in primary school.
Yes, ideally, the future income of the bond will be roughly determined by the combination of time and coupon. Under certain other conditions, the longer the term of the bond held by the investor, the greater the yield, and vice versa.
03 low suction and high selling: jealous price difference
In "The price of a bondIt is understood that with the inverse relationship between market interest rates and bond prices, existing bond prices fall when market interest rates rise; conversely, existing bond prices rise when market interest rates fall.
If Niuniu buys a bond at a low price, the market interest rate will fall all the way down in the future, and you are lucky enough to find a high price to take over, then the difference (spread) is the yield. Low suction and high selling is the most wonderful way to make money.
03 reinvest: stop! I'm going to change to the next one.
After selling the previous bonds, invest in a more promising bond with principal and interest, that is, reinvest.
Every investor has his own judgment on asset allocation, and everyone has the right to "change cars", but when reinvesting, we must keep in mind that only products with higher coupon rates can bring higher returns. And the way is not only to compare the coupon rate can be judged, but also uncontrollable market interest rates, credit risk and other factors, find ways to make you regret.
Conclusion
Interest income, spread and reinvestment are the three swordsmen who constitute the bond yield. further, the coupon rate, investment duration, market interest rate and other factors will affect the yield. No matter what kind of investment, can not be too arbitrary, interest rate is a double-edged sword, the achievement of you will also hurt you, and time is always the company of the longest love.
