Question of the Week

Dave, a conservative investor, comes to you for advice on a diversified fixed-income portfolio. He wants to live off the interest generated from the bond investments, in which he needs 6% per year. Dave is afraid that interest rates might be on the rise. All of the following should be considered when buying the bonds EXCEPT:

a) Maturity of the bonds
b) Coupon rate
c) Debt-to-Equity
d) Quality of the issue

Answer:

The correct answer is c:

When setting up a diversified bond portfolio you should consider the following factors- maturity, taxes (location of the issuer), coupon, quality, and the current interest rate environment, to name a few considerations. The debt-to-equity of the issuer is typically not a primary concern.

Financial Professionals
  1. How Much Does A Financial Advisor Earn?
    Investing Basics

    How Much Does A Financial Advisor Earn?

  2. Growth Strategies For Financial Advisors
    Professionals

    Growth Strategies For Financial Advisors

  3. Eyeing China? Consider These Economic Indicators
    Economics

    Eyeing China? Consider These Economic Indicators

  4. 8 Essential Tips For Retirement Saving
    Investing Basics

    8 Essential Tips For Retirement Saving

  5. 'Donut Hole' Essentials For The Financial Advisor
    Investing Basics

    'Donut Hole' Essentials For The Financial Advisor