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Naked Guide to Bonds

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Naked Guide to Bonds

What You Need to Know - Stripped Down to the Bare Essentials

Wiley,

15 min read
10 take-aways
Audio & text

What's inside?

Even naked, bonds aren't sexy - unless you lust for current cash and long term income preservation.

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Editorial Rating

7

Qualities

  • Applicable

Recommendation

In this very good beginner's guide to the bond market, author Michael V. Brandes addresses all of the fundamental questions clearly and concisely. Bond math can be daunting, but while the author includes a few equations for illustrative purposes, he clearly addresses his book to the general run of individual investors. The book, which has moments of surprising good humor, says right off the bat that bond investing can be dull in comparison to stock investing, not because the stakes are lower, but because the elements of personality and surprise are considerably more muted in the debt market than in the equity markets. getAbstract.com highly recommends this book, even though it is pedantic at times - a risk you take when you venture into the complex realm of bond investing.

Summary

Bond Basics

The bond market is bigger than the stock market and bond investors did much better than stock investors during the stock slump that began in the year 2000. Bonds don't usually give you capital appreciation, but they are the best investment for capital preservation and current income. Most stocks can't match this advantage since many of the best ones are shares in companies that pay little or no dividends.

When you buy a bond, you're essentially lending money to a company or a government. You charge an interest rate and have certain rights as a lender. Of course, as a small investor you don't set the terms, but you can shop for bonds that meet your objectives.

A bond usually begins when a mayor, a CEO or even the U.S. Secretary of the Treasury seeks cash and issues bonds to get it. In a couple of cases, even rock stars have issued bonds. The issue begins with a call to an investment banker, the native guide to the bond market. Investment bankers know its baffling ways, including what kind of bonds people are buying these days — since even finance has its fashions — and what structures, currencies and maturities the market prefers. You can buy public...

About the Author

Michael V. Brandes is Director and Fixed-Income Strategist in the Investment Strategy Group at Smith Barney, a division of Citigroup. He is the founding author of Bond Market Monthly, the firm's flagship research publication for individual fixed-income investors.

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