UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next
Author: trader2012 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35365  
Subject: Revising Howard’s Scanning Rule Date: 2/27/2012 1:12 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
In an informative post, #33695, Howard said that, these days, he’s not looking at anything priced under 50 and that the rule is keeping him out of trouble. I’d suggest that the cutoff-price could be bumped up to 60 as an easy way to avoid bonds that probably offer more grief than reward. It would be nice if there were also an upper price above which it isn’t prudent to buy. But there doesn’t seem to be one, as you can verify for yourself (just as you should also verify the utility of the lower cutoff price). But let’s focus for a bit on the upper-end of the price-range.

If you grab the 500 highest-priced bonds, what you will notice is that a mere 11.8% fail to offer a real-rate of return even when discounted for a 5% inflation-rate. So, clearly, the fact of selling at a premium to par shouldn’t necessarily, in and of itself, be a buying deterrent. Do all of us hate paying a premium to par? Of course. But what we should really be hating to pay is a premium to value. That’s what is unwise. How is ‘value’ determined? Ah, grasshopper, now you’re beginning to ask a question worth answering and one that your investment plan (which you do have, right?) will tell you.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next

Announcements

Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Apple

Apple and Ninety Years Ago
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement