Hold a mix
of safer government bonds along with corporate and higher - risk junk bonds to balance out safety and higher returns.
In the financial crises of the last several years, he says, investors have flocked to
seemingly safe government bonds, driving up prices and driving down yields.
Once you have calculated the implicit interest rate (i %), compare that rate to the yields of
super safe government bonds that are laddered with different maturities.
It's reasonable these days to
expect safe government bonds to return less than 3 %, so there's a gap that needs to be made up by investing in riskier assets with less reliable returns.
You can invest some of the leftover cash
in safe government bonds and earn some yield while your investment is doing its job (but keep some extra cushion as you don't want the broker to liquidate your position if your loss exceeds the margin)
Despite the global stock market selloff, investors are showing little interest in
the safest government bonds.
Sometimes, you want to purchase shares with a company that could result in significant yields if the company ends up being successful instead of going with
the safer government bond (or other safe assets) route.