Shares are not the only asset available for investment. The second basic class of assets on the capital markets are bonds. Bonds are a different type of security than shares. Represent shares on the company’s assets. The first urite is connected with tm. Voting first at the general meeting, according to the profit, the right to a possible dividend, etc. The bond represents the relationship between the debtor and the creditor.
The company that ed obligations, pay his holder regularly for a year and repay the principal at maturity. With both species cennch papr different risks are also associated. The value of a share depends mainly on the company’s ability to make a profit and its assets. The value of the bond depends primarily on the company’s ability to meet the bonds associated with the bond. So pay for years and pay off the principal.
In the case of selecting suitable actions, it is possible to proceed with the help of the so-called bottomup approach. This means that we will focus on the selection of individual stocks on the basis of investment criteria and the selected stocks will then compile a portfolio. In addition to the bottomup approach, there are a number of other approaches to portfolio creation. The logical topmic and standing on the other side of the spectrum of monost is the topdown approach. In this case, investors first deal with the allocation of the portfolio between classes of assets, ie stocks, bonds, money market, real estate, according to regions, currencies, sectors and finally deal with individual titles. Such an approach to the investment bag carries with it many speculative elements. Even though the allocation of assets between the two bases – stocks and bonds – is important. The procedure for the bag will be somewhat different.
First, history from history. Tab. .1 shows an overview of the historical entry of the American market over 200 years. We can take some information from the table. First, long-term real-estate returns are often markedly positive. The only exception was the period, which included the oil sector of the 1970s and the associated unusually high inflation. Second, long-term real-time action returns are surprisingly relatively stable.
Now let’s look at how US government bonds performed over the same period (see Tab. .2). sla show you interesting things. The first of these was to be expected. Long-term real bond yields are more pronounced than stock yields. He gave two twists ns bag of surprise. First, real bond yields can be challenged for a long time and therefore not even cover inflation. This will be a fairly common issue about bonds as a way to guaranteed positive real returns. And secondly, the volatility of the bond yield does not interfere with the volatility of the stock deposit. This will put the mtus associated with bond deposits.
Max. a min. real inputs for different drain times, 18022001
Zdroj: Jeremy J. Siegel Stocks for the Long Run, str. 27
The figure shows the maximum and minimum relative returns of three basic assets in the USA (shares, bonds and treasury bills) for different drain times. Opt, we can deduce a few twists from the picture. First, stocks carry, on average, bonds and treasury bills. Of course, no one is surprised. Likewise, do not surprise the kind of zvr. This is the fact that short-term action returns are much volatilnj no bond deposits and go more volatile no treasury bills. Tet zvr is a bag quite surprising. For a period of two years, which is not particularly long-term for a long-term investor, the disputed volatility of the stock is almost comparable to the disputed volatility of bonds and treasury bills. What does that mean? This means that the real loss, the name with historical results, is comparable to stocks, bonds and treasury bills. With a five-year investment horizon, stocks, again with historical results, have a much higher probability of a large profit, not bonds and treasury bills. With an investment horizon of less than five years, the proceeds of the event get into a better light.
From all these findings and other arguments presented in the previous chapters, we can state this particular. Shares are a particularly suitable asset for a long-term investor, whose goal is to increase the value of the portfolio. Debt securities, ie bonds and treasury bills, are especially suitable for maintaining the fair value of the portfolio. This reversal should then lead to an effort to allocate assets. If the investor has a long-term and expected investment horizon of five or more years, then his portfolio should consist firmly and exclusively from the stock. If his investment horizon is times short, he should think of treasury bills as
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instrument suitable for maintaining the value of its pensions. Likewise, if the investor’s goal is not to grow, but to preserve the value of his portfolio, then he should consider short-term bonds and treasury bills. This is the only weight that leads to the allocation of assets in the direction of topdown. The investment in the event itself must be done through the bottomup procedure according to the two procedures.
Modern portfolio theory does not consider drain time at all. This is due to the vry in the efficiency of the stock market. Modern portfolio theory recommends allocating assets according to the expected return and risk and, with many equivalents, recommends changing the balance of individual assets in the portfolio. Such a procedure assumes the ability of the market. Empirical evidence shows that the time market is not only not easy, but most investors, famous professionals and academic celebrities do not exclude him. Modern portfolio theory states that a fundamental attribute of revenue is asset allocation. The rest can not even claim anything else, because it does not acknowledge that it is possible to actively choose an undervalued stock. If we introduce a bag into our weights, then if we lean towards the theory of the efficient market, then the allocation of assets will have a different meaning and form. The share is the investment horizon, so t shares should be represented in the portfolio. It is theoretically speaking that over a period of 20 years or more, the portfolio should contain no more than 100% action. This can be achieved with the help of so-called leverage, or the addition of pensions, or a short sale of bonds or treasury bills. Investment loans have a lot of speculative inspiration for the average investor and therefore we will refrain from investing only those pensions that we own. If we limit the maximum investment to 100% of own pensions, then based on historical data from the US market, the recommended asset allocation could look like the table.
|According to the portfolio allocated to the action, recommended for the storage of historical data|
|Risk tolerance||Doba dren|
|1 year||5 let||10 let||30 let|
Zdroj: Jeremy J. Siegel Stocks for the Long Run, str. 38
If all your investment goals and investment horizons introduce both bonds and treasury bills, then the most suitable form of investment for this portfolio will be open to a mutual fund focusing on domestic bonds or the domestic money market. The bond and treasury market itself is inaccessible to the average investor due to the size of individual transactions and due to its other characteristics. For this reason, catching funds is a good way for even an investor to participate in these markets.
ryvek is from the book “Make the investment”Vydan nakladatelstvm City Publishing, who published publications in the FINANCE edition such as:
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