
Financial Trading
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What is value investing?
The premise of value investing is that the market isn’t always efficient in pricing a company’s intrinsic value. A value investor seeks to exploit these inefficiencies to profit from them. This is usually by being contrarian and going against the herd (all typical value investing terms). It’s the strategy most associated with the common investing phrase ‘buy low, sell high’. The value investor seeks out value stocks that are trading below their book value.
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What are the benefits of investing in bonds?
Income: The coupon payments on bonds can provide a predictable and stable revenue stream
Diversification Perhaps the most significant benefit of investing in bonds is the diversification they can bring to your portfolio. Although shares have outperformed bonds over the long term, holding a portion of your portfolio in bonds can help reduce financial risk.
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What types of bonds are there?
In Australia, there are two types of bonds:
Corporate bonds: These are bonds issued by companies. They tend to offer higher interest rates, but there is more default risk with small, growing companies than with large, blue-chip companies and government entities
Australian Government bonds: These are bonds issued by the federal government. Due to the lack of default risk, they are considered safer investments than corporate bonds and offer lower interest rates.
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