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Amal
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| 18 January 2009, 21:56:39 |
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Friends my understanding out of the above situation is of mixed nature. Some unrelated factors getting mixed up and a different picture immerging.
A few quarters of negative performance is normal in business cycles so one has to go thru this periods. Alibit low profits do become a part of the out come. But while a bond is being valued there are lot of factors that go into valuating the bond. they are
A) The credibility of the issuing corporate.
b) The rate of coupon
c) the discounting factor
d) the Duration of the paper
While in the investing side we will have a portfolio of n number of papers creating the port folio which will give rise to a different dynamic situation including the above.
Now if the condition is invest and hold to maturity there should be no problem with the yield part of it.
but if the security has to be actively traded then the question is how the current interest rate prevailing in the markets this will give rise to the volatilaty in the prices/ valuation and this is what one should be looking at with the interest rated expected to go down a moderate out performance is bound to happen. So some one with a 1-1 1/2 year horizon should be able to look at above par return in debt category. Most important aspect will be post tax returns these may not look all that good. |
