Bonds spinning contractually obligated, therefore, with the exception of credit risk, by default: the company can go under, the benefits are defined and established. The shares are likely to change, there is the possibility of loss reserves, but in general, companies exist to make money so long as the business is strong, shareholder value can be appreciated, however, the return is uncertain, may much, can be null or may even be a loss.
Volatility Pumping
This means that there are two asset classes with different probabilities and outcomes. Therefore you can take advantage of volatility in stock prices of portfolio rebalancing between farms in both stocks and bonds. This is known as volatility pumping and Shannon is the basis of Demon or the method of Shannon. Whenever there is a market slowdown, media interview someone like Warren Buffett and ask what you can do about personal finance that the answer always is to rebalance the portfolio.
Modern Theory
Modern portfolio theory, initiated by Markowitz and the efficient frontier, says that a portfolio of stocks and bonds from 25% to 75% will have less risk, less than a bond portfolio of 100% and yet he give better performance. It also says that a portfolio of about 50/50 has the same risk as a bond portfolio of 100%, but a much better. The profitability and the risk increases as a portfolio allocation is increased by over 50% of values, but with the return of the decline in the marginal return marginal risk ratio flattens and approaches zero so you can take excessive risk if the portfolio allocation is more than 50% of shares.
About the portfolio
Ben Graham called for a portfolio of 45% equities and 55% bonds, however, if you are making regular monthly contributions to your portfolio, you can consider contributing cash flow as a kind of bond and therefore justify increased allocation of values, however, the potential future contributions are an asset not so marginalized by the current liquidity limited so that a portfolio of equities 100% although potentially justifiable from an early age due to the amount of contributions yet to be made can not take advantage of an extreme crisis of the markets as we live, because the rate of adjustment is limited to dollar cost averaging contributions.
Consider this
The ratings refer to the risk of default and is largely meaningless for a country like the U.S.. However, as he had never been to the U.S. before, there was much speculation as to how much the cost of borrowing would increase for companies throughout the economy. The feds have largely denied the speculation by promising to keep the federal funds rate between 0% and 0.25%, until mid-2013 it is expected that the additional $ 100 million per year cost lending has not materialized but companies are still Gun Shy, preferring to sit on cash then the risk of business projects.
No comments:
Post a Comment