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Author: wrongnumber One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: Diversifying Date: 1/3/2011 11:10 PM
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Ti, thanks for the response (I gave you a rec for your thoughts).

I understand what you are saying. However, if what I am looking for is a fixed return and I want to limit the exposure to interest rate risk, I should be able to hedge the interest rate risk and still receive the interest income. I would give up the opportunity for capital gain on the underlying security but I would still collect the interest. It is not quite the same as your roulette analogy (maybe the double zero is the default risk?).

It would be interesting to hear from someone who has done this, how they did it and what was the result.

I have seen lengthy threads about whether there is a disctinction between investing and speculating and I did not intend to begin another one of those arguments. The derivative comment is mainly my opinion about those instruments.
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