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Investing/Strategies / Bonds & Fixed Income Investments
|Subject: A Fast Fill||Date: 12/21/2012 1:39 PM|
|Author: globalist2013||Number: 34574 of 35576|
My preference for buying bonds (and, especially, for selling them) is to execute through IB where commissions for small lots are the cheapest ($1/bond, $5/ticket) and the buy/sell process is straight-forward. But IB doesn’t quote as widely as E*Trade or Zions Direct, nor is their search-engine as easy to use. So I end up executing where I have to.
As I ran my usual scans this morning, an offering I hadn’t seen before showed up. So I went into high gear, pulling charts, calculating numbers, making judgments, and I concluded I should take a position. “How much?” was the next question. The min-purchase was bigger than I wanted to accept. I could afford it in the sense of having enough cash to do the trade. But since this was an issuer I hadn’t already been tracking, I wanted to dip a toe rather than jump in. Instead of putting on what would ultimately be my final position if the market were to confirm that my entry had been correct, I wanted to put on no more than half a position initially, and a quarter would be preferable. Smaller lots were available in the book if I’d be willing to pay up. So I re-ran my numbers to confirm that the price increase wouldn’t have an excessively negative impact. (I.e., things like calls have to be considered.)
Meanwhile, the quote line I had initiated at IB had become flagged “NT”, meaning, though IB would quote the bonds, they wouldn’t transact. So I had no choice but to execute through ET or ZD, both of whom were showing the same book. But there was some idle cash in my IRA. So I used ZD.
That’s not bad, right? From submission to execution in under one minute.
Last week, I was thinking that I was done buying bonds for the year. Anyway, that’s the conclusion I came to after nearly a week of scanning daily but seeing only rising prices and fewer listings. But I am nothing if not a bond professional who shows up for work every day and who does his job. And that job is to look for bonds to buy. This week, to my surprise --though I shouldn’t have been surprised-- I’m again finding things to buy, and today’s purchase is my third this week so far.
OK, let’s step back and look at the larger picture.
YTD, I've initiated 111 new positions, a total of $210,000 face, at a cost of $178,798. That might seem lot a lot of buying and a lot of money. But do the next step and break those numbers down to weekly and daily averages. On average, I was adding two new positions per week. A measly two new positions! That’s not an aggressive, hyper-active pace. You get up in the morning, and you run some scans. If there’s nothing to buy, you’re done for the day. If something shows up that merits digging into further, you run your vetting procedures, and then you either execute or back away, and you’re done for the rest of the day. This is exactly why I say that bonds are the easiest of gigs. The shopping is no more demanding than buying bell peppers or broccoli. You walk into the store, check prices against what you know about where prices should be, and then you buy or you don't buy. Your job really is that simple. Check prices. If they offer a favorable risk/reward ratio, you buy. If they don't, you back away. How is that hard to understand or do?
On a dollars-basis, it’s true that my spending an average of $715 per market-day is probably more money than the average investor is working with. But, then, I’ve been at the game longer than most investors have, and I’ve clearly been more successful then they, especially over the past decade.