I do not feel that now is a good time to invest in long-term bonds. The reason is this – the value of long-term bonds decreases as interest rates increase. As this looks like an increasing interest rate environment, long-term bonds look like they would come with an opportunity cost. Short-term bonds would be a better investment in this environment..
There is a Federal Reserve rate increase expected this week, but that has already been priced into the bond market (Robb, 2017). The idea of the Fed increase is that it will place a constraint on economic growth, in which case the current economic expansion will continue "at a steady pace without overheating" (Robb, 2017). Indeed, the Fed has already cautioned that if the market does not respond with slowing conditions that "All else equal, an easing of financial conditions may warrant a somewhat steeper policy rate path." (Robb, 2017). Thus, the current condition is that rates are going to increase, but they will likely have to increase again, and perhaps at a faster rate than is currently built into long-term bond prices.
There is, however, the question of whether or not a new tax plan will be passed, and...
References
Hayes, D. (2017). Bond basics tutorial. Investopedia. Retrieved December 11, 2017 from https://www.investopedia.com/university/bonds/bonds3.asp
Robb, G. (2017). Here's why the Fed will hike interest rates on Wednesday. Marketwatch. Retrieved December 11, 2017 from https://www.marketwatch.com/story/heres-why-the-fed-will-hike-interest-rates-2017-12-11
Long-Term Financial Planning FedEx Corporation FedEx Corporation was established in 1971 and the company has four distinct business segments that include FedEx Express, FedEx Ground, FedEx Office and FedEx Freight. Over the years, the company has obtained 6-year of CAGR (compounded annual growth of 5%). However, the company is likely to obtain similar CAGR of 5.9% over the next 8 years based on current economic environment. (FedEx Corporation .2010. The WACC (weighted average
Both short-term investments and long-term investments have advantages and disadvantages. One of the main advantages that short-term investments have is their potential for quick growth as they are only expected to last a couple of weeks to a few months. These types of investments allow a company to have more control over their money. On the downside, short-term investments carry a higher risk and have demonstrated a higher rate of
Bonds I do not feel that now is a good time to invest in long-term bonds. The reason is this – the value of long-term bonds decreases as interest rates increase. As this looks like an increasing interest rate environment, long-term bonds look like they would come with an opportunity cost. Short-term bonds would be a better investment in this environment.. There is a Federal Reserve rate increase expected this week, but
Investing Capital Mutual fund Investing is important for it ensures that at the end of a certain period you can benefit out of your invested money. Investing can be done through investment funds. Investing funds are collective investment schemes that require investor to create a pool of capital and in return the investor enjoys wide diversification, professional management, and lower costs that would have been otherwise impossible using a small amount of
Bond Review Compare and summarize a separate article on why companies or individuals invest in bonds. There are a variety of reasons as to why a corporation or an individual will purchase bonds. Some of the most notable that were previously discussed include: safety, steady returns and they are providing diversification to the portfolio. To determine the accuracy of these findings we will compare these ideas with those from a piece literature
Investing in Walt Disney Company Characteristics of its bonds Apparently, Disney's bonds seem to be in an enticing situation. After a dip during the past years, Disney's bonds seem to be in great demand. In June of this year -- little less than 3 months ago - it offered a 3.75% banking 10-year paper with over $25mm. This was the hot-shot then, specially in a time when post-holiday trade was lax, and
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now