There are some things to understand about bonds before you choose investing in them. If you do not understand this type of investment vehicle, it may cause you to buy the wrong bonds, with the wrong maturity date.

There are 3 most important things to consider when purchasing a bond. They are: par value, maturity date and last but not lease coupon rate. (more…)

The capital allocation line shows the risk-return trade-offs available by mixing risk-free as- sets with the investor’s risky portfolio. Investors can choose the assets included in the risky portfolio using either passive or active strategies. A passive investing strategy is based on the premise that securities are fairly priced and it avoids the costs involved in undertaking security analysis. Such a strategy might at first blush appear to be naive. However, we know that intense competition among professional money managers might indeed force security prices to levels at which further security analysis is unlikely to turn up significant profit opportunities. Passive investment strategies may make sense for many investors. (more…)

It would be a mistake to think that all the facts that describe a particular investment are or could be known. Not only may questions remain unanswered; all the right questions may not even have been asked. Even if the present could somehow be perfectly understood, most investments are dependent on outcomes that cannot be accurately foreseen. – Seth Klarman – (more…)