Your Questions About Investing In Bonds

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Michael asks…

i want a high paying career in business. like stocks, bonds, investing. Do you have any job names for that?

Justin answers:

Investment Banker, Get a series 7 license and you’re on your way.

Thomas asks…

Is it possible to immigrate to UK by investing in UK Goverment bonds?

Im Filipino and unmarried.

I want to immigrate to America but I don’t think they allow immigration through investing in bonds.

Here’s the link to my other question I posted before.
http://answers.yahoo.com/question/index;_ylt=AsRIEnhaNYOI9VXcuBIssPLsy6IX;_ylv=3?qid=20090612101901AAaKyvN

So how about the UK?

I don’t want to invest in stocks. They are too risky.
Can I immigrate by investing in UK Government Bonds?

If yes, what types of bonds are allowed?
I want to invest in inflation-indexed bonds.

Also, what is the minimum amount required that I invest?

Also, how many years will I have to live in UK so I can become a UK Citizen by investing?

Justin answers:

Investment in government bonds is not enough to qualify for an investor visa to the UK

To qualify for a Tier 1 Investor visa

Applicants have at least £1,000,000 of their own money in a regulated financial institution in the UK, or

A) Own personal assets which exceed £2,000,000 in value, provided they are not subject to any liabilities; and
B) Have money under their control held in a regulated financial institution and disposable in the UK of at least £1,000,000

So even if you bought a £2,000,000 home, you’d still need to have another £1,000,000 in liquid assets

Richard asks…

Question about investing in bonds?

I read everywhere that as interest rates rise, bonds become less valuable. However, I can’t find anywhere that explains why this is the case. Can someone explain this to me? Are bonds devalued as interest rates rise only because there will be a corresponding rise in inflation? Or am I missing something? A related question: I’ve read that Treasury Inflation Protected Securities (TIPS) are tied to inflation. Does this mean that they will essentially never lose value unless deflation occurs? Final question: how would you recommend investing $10,000 today, if you have a medium-high tolerance for risk, and have an investment duration of 3 years? Thank you for your advice/help!

Justin answers:

Competition

If you held a 10 year bond for five years and then decided to sell it, you would be competing with the readily available 5 year bonds with the same risk, perhaps even from the same organization but the interest payments on your bonds haven’t changed therefore the price of the bond has to drop in order to provide for the necessary gains in order to meet the newer higher rates.

With a TIPS, the face value of the bond (the principle) varies according to the Consumer Price Index. The interest payments are a percentage of the adjusted face value and the redemption is of either the original face value or the adjusted face value, whichever is greater. If you believe the Consumer Price Index is indicative of your living expenses then the TIPS would protect you against inflation. Note that the paying the original face value or the adjusted face value, whichever is greater would result in a TIPS gaining value in a deflationary cycle though it would lose interest payments.

People talk about tolerance as if it’s a psychological factor and it is for those who wish to sell you securities but it’s really a matter of your portfolio. There is an optimal amount of risk for any given venture and if the outcomes and probabilities are known which they rarely are, that limit can be calculated. Fact is, Warren Buffett can afford to lose a million at a moment’s notice, you, probably not so much. Much has been written about risk, from Bernoulli risk over 300 years ago to the Markowitz bullet. According to Markowitz, the portfolio with the least risk would be 25% at risk (equities) and 75% secure (bonds); he also says that a 50/50 portfolio will have the same risk as 100% of the secure assets (bonds) but much better returns. Markowitz doesn’t place a limit as to when potential gains no longer outweigh the marginal risks required so he doesn’t place the optimum risk. Bernoulli’s risk seems to do that best by utilizing a log utility of wealth and is often known as the Kelly Criteria according to a paper put out at Bell Labs applying information theory to gambling and finance. After all’s said and done, Ben Graham’s advice of 45% stocks and 55% bonds is still the best advice around and concurs with both information theory and Markowitz’s risk, however this can easily be interpreted to a more aggressive posture if you consider contributions from your paycheck as a secure investment therefore a young investor can invest in aggressive 100% portfolios knowing full well that he is going to continue contributing funds from his paycheck and can take advantage of bargains by dollar cost averaging effectively being in Ben Grahams 45/55 range. If it was just a $10,000 lump sum investment then it should be at the moderate 45/55 risk proposed by Ben Graham. But if it’s part of a larger portfolio including regular deposits from a salary then more aggressive measures can be tolerated.

Three years isn’t much of an investment horizon. There’s basically two phases to your investment life, accrual where you build up an investment and dissemination when you distribute the investment during retirement. Investment is a lifelong process. Anything shorter are just projects.

John asks…

can anyone give me any information about “investing in bonds” or “bonds” (financial)?

im doing a little bit research on financial accountng. Can anyone help on “bonds” and how to invest using it?

Justin answers:

The only bonds I have is saving bond. I purchase them through pay role deduction. You can buy direct http://www.savingsbonds.gov/
or http://www.publicdebt.treas.gov/sav/sav.htm

the I is paying 2.41% and EE is paying 3.70 good deal if you don’t need the money for a long time.

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