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Subject:  Re: Your Best Pal, Ben? Date:  9/21/2012  9:40 PM
Author:  howardgt Number:  34406 of 36299

my guess is maybe one or both of you, simply just factor a potential or realized loss/position into your income stream thus lowering your actual YTD rate of return.

Yeah, that’s basically my strategy. As Charlie states, everyone has their own goals and objectives. My objective in buying individual bonds is to create an annuity-like income stream. I am prepared to risk capital in order to increase income. That’s why I stick with junk bonds. I’m basically a buy-and-hold investor from way back, so I buy bonds with the intention of holding to maturity.

I don’t consider myself smart enough to know if a company can hang-on until maturity when prices or earnings begin to deteriorate, so I’m prepared to go down with the ship. I try and keep my bond portfolio well diversified (although sometimes I break this rule). My target is a 10% nominal return over the life of the portfolio, so I try and average 13% YTM and hope not to lose more than 3% to defaults, reorgs and BKs. So far it has worked out very well. But the real test will come when the next recession hits. I figure if it occurs within the next few years, then I will probably miss my target. But if we can hold off for a while, I should make my target.

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