[lbo-talk] A bond market crash?

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Mon Jun 8 18:20:28 PDT 2015


Carrol asks:


> "diversification if you're buying corporate bonds":
> The shorthand here is over my head. What is the point?

If you buy a single bond, and the company defaults, you're screwed.

If you buy a bunch of different bonds, from different companies, if any one of them defaults, you're probably okay. So: a bond fund, which has access to a wide variety of bonds, can do two things:

- Keep you from losing any single bond - Provide a range of yields, such that the aggregate is better (risk-adjusted)

than any single bond you can buy

If you can buy a bunch of bonds on your own, you don't need the fund, you are one :-)

/jordan



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