Non-Convertible Bond @ 1.3% . . . Why Buy ?

Discussion in 'Investments' started by trajan, Jul 3, 2017.

  1. Sarenco

    Sarenco Frequent Poster

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    Not sure I follow.

    The existence of an equity risk premium is an observable historic fact. Investors demand compensation for taking risk - otherwise they would just invest in risk-free assets.

    The effect of "time diversification" doesn't make stocks less risky, it just increases the probability that the risk will be compensated. Put another way, it "averages out" the occasional negative outcomes of shorter holding periods.
     
  2. Jim2007

    Jim2007 Frequent Poster

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    You went from bonds to money market products in a single sentence - know the difference!
     
  3. Sarenco

    Sarenco Frequent Poster

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    No Jim, I didn't. Short term bonds are not money market instruments.

    It is obviously the case that bonds come with their own set of risks but it remains the case that equities are always riskier (more volatile) than bonds. That is true of bonds at all durations.
     
  4. fistophobia

    fistophobia Registered User

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    Short term government bonds, triple A rated, have lower volatility. It is not accurate to say "true of bonds at all durations".
     
  5. Sarenco

    Sarenco Frequent Poster

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    No, it is accurate.

    Over the last 40 years, the standard deviation of US stocks, for example, was around 15%, versus a standard deviation of around 11% for long term treasuries.

    Long-term bonds are certainly a lot more volatile than short-term bonds - but they are still less volatile than equities.