Bond Management Strategies

Presentation by Vasuki Veerendragouda Vijay patil Vani

There are two types • 1) Active bond management strategies • 2) Passive bond management strategies • Bond investors may adopt passive or active approaches to the management of their portfolios. The passive approach is usually identified with a buy-and-hold strategy. Active bond mgt involves switching and swapping bonds as circumstances change in the markets for fixed-income securities.

Buy-and –hold strategy • A buy-and-hold strategy essentially means purchasing and holding a security to maturity or redemption (eg:by the issuer via a call provision) and then reinvesting cash proceeds in similar securities • • By holding securities to maturity, any capital change resulting from interest change is neutralised or ignored( by holding to maturity the par amount of the bond will be received) • • The passive or buy-and-hold strategy is used primarily by income-maximizing investors like reired persons,endowment funds, bond mutual funds and insurance companies.

Bond ladder strategy • Building a bond ladder means buying bonds scheduled to come due at several different dates in the future, rather than all in the same year •

Bond laddering is a smart-investment concept for conservative individuals who are unsure of interest rate movement and are afraid to bet on any one forecast.