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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76106  
Subject: Corporate Bond Market Spreads Date: 8/10/1999 6:24 PM
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Forbes Magazine has an article on the corporate bond market in its current issue. See link:

http://www.forbes.com/forbes/99/0823/6404040a.htm

intercst
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13058 of 76106
Subject: Re: Corporate Bond Market Spreads Date: 8/11/1999 8:57 AM
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Intercst, thanks for the posting. I hope you will share some of your expertise over on the Bond and Fixed Incomes board under Investors Roundtable.

Agreed that it is better not to buy bonds on the open market if you can avoid it. New issues appear to be a better deal. But in reality their costs are hidden.

If you follow the trail of a corporation that decides to issue a bond for financing: deals are struck along the way, the expensive services of the investment banker are retained to price the bond, decide on the coupon and maturities, and get it rated, and finally a distribution mechanism offers the bond to the individual willing to buy it. Meanwhile mechanisms are set up to record who owns each bond and pay the interest payments.

Its a pretty good bet the corporation that issues the bonds pays well for all these services. The individual that buys it pays some of it too.

Some see this as an antiquated or even shady side of Wall Street. But its a valuable service. The question is can it be made more efficient. Bonds do provide capital for those who need it--presumably at a price they feel is competitive or attractive. In reality it gives corporations more options for financing. And it gives investors willing to take the time to learn attractive but usually conservative investment opportunities.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13065 of 76106
Subject: Re: Corporate Bond Market Spreads Date: 8/11/1999 11:00 AM
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pauleckler writes,

intercst, thanks for the posting. I hope you will share some of your expertise over on the Bond and Fixed Incomes board under Investors Roundtable.

I'm not sure I have any special expertise regarding bonds.

The investment strategy I've employed since 1990 is to minimize fees and commissions and "limit the spreads" on my investments. Fees, commissions, and the bid/asked spread are the first things I examine in a potential investment. Potential returns are secondary. I refuse to pay additional fees, commissions, or "mark-ups" for an "exceptional" investment opportunity. So far, this has worked like a charm as I've enjoyed a 40% compounded annual growth rate (CAGR) on my primary IRA since 1990.

I encourage others to pay as much attention to the "expense" side as the "investment return" side of thier investments. Limiting what you pay in fees, commissions and spreads is a risk-free way to boost your returns.

intercst



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