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The performance of actively managed hedge funds would disagree with that. Doesn't seem like anyone can manage it consistently https://www.cnbc.com/2019/03/15/active-fund-managers-trail-t...
Yep people like to distinguish between “dumb money” and “smart money” but the truth is there is no such thing as smart money.
Cash flows with different durations can't be used in carry trades so this cannot be exploited even if you have a hypothesis about the relative risk of each asset.
Convexity increases the price of high duration cash flows which drives down yields of instruments such as the 30 year treasury.
I'd rather have bonds with a small yield than the S&P (which fluctuated 3% almost every day this week) with a higher yield.
I backed the truck up in 2018 for Fidelity Treasury Bond Index Fund. Most of of my 401K is in it. It's up 31% in the last year. With almost no management fee. That's all.
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Is it fair to say that one reason the bond market is so large is because of capacity and simplicity? The impression I get is that when you start talking in terms of $x0M+ US regular investment (e.g. on Monday, then again on Tuesday) stocks become a less viable option (due to liquidity and risk of orders moving the market). Bonds also seem more simplified and standardized, in that there are fewer weird / unmodelable f…
Bonds are actually more complex. Try understanding covenants on bonds, it is not easy. There are hedge fund strategies that rely on better (than market) understanding of the legalese, triggering weird cases of technical defaults (i.e. defaults other than through a lack of timely payment) and whatnot.
Compared to a bond, even one with esoteric clauses, that seems more complicated.
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I know someone who did this. It didn't work out and it's their single biggest financial regret in life.
I've seen 6 people in the last 2 weeks on wallstreetbets gamble away their student loans. The sad part is one guy will post their success of doubling their student loan, and it will just cause a bunch of younger inexperienced 19 year olds to lose tens of thousands to their own gambles. It's really sad. It's an addiction
I'm not sure why this headline is news. Bond yields should be less than S&P dividend rates because with a bond, there is a much higher likelihood of getting your principal back (debt is senior to capital) that isn't there with underlying stocks of the S&P. Also, the underlying stocks of the S&P can cut their dividends to 0 tomorrow without warning, so you need to price this risk in.
> Bond yields should be less than S&P dividend rates No. Stocks don’t necessarily pay out any dividends at all, like google or amazon. Stocks can also give substantial capital gains. Bonds have historically had higher yields than the dividend yield of the S&P to entice people to purchase them to compete with this fact. While they have a higher chance of getting your principal back they also have to compete with other…
They did, but if dividends are higher than bond yields, that could be nature's way of telling you that future capital gains will be roughly zero or less.
If you look back like 40 years, the long term bonds ended up returning about the same as the stock market. So maybe the current long term yields are telling you what stocks will return over the same period of time.
I'd rather have bonds with a small yield than the S&P (which fluctuated 3% almost every day this week) with a higher yield.
The US government will outlive most S&P companies. Additionally, the US government can't run out of paper money.
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Bonds are actually more complex. Try understanding covenants on bonds, it is not easy. There are hedge fund strategies that rely on better (than market) understanding of the legalese, triggering weird cases of technical defaults (i.e. defaults other than through a lack of timely payment) and whatnot.
The way I was looking at it... technically by owning a stock you're exposed to the risk of the entire corporate legal structure (e.g. board, bylaws) as well as operational structure. Compared to a bond, even one with esoteric clauses, that seems more complicated.
The primary reason why they want covenants is because credit holders do not get to influence management (except in Chapter 13, when they basically take over the company).