All You Need to Know about Fixed Value Investments

Introduction to Fixed Value Investments

Extreme losses were experienced during the Great Depression. Any investor must be aware of the fact that bond is an investment that comes only with very limited returns. Its selection is a negative art. One has to be prepared for its exclusion and reception. One has to be a little cautious when it comes to fixed value investments. Benjamin Graham of the Security Analysis Summary says that the small company bonds can result in unexpected happenings anytime and may even sometimes get disqualified. Definite standards of safety have to be applied cautiously. It must not be relaxed if it is a short-term bond. Deep care and attention need to be given to the trend, minimum and current earnings. Hard rules can never be applied to it.

Security Analysis Summary

 

Value of Fixed Bond Investments

The value of fixed bond investments depends solely on its ability to take care of debts. The value of the property on the bonds is only a secondary priority. An example of this is the real estate bonds. The value of the land or the building pledged in the bonds are more important. The property value and rental value are always dependants. The lender decides on its rental details. The value of buildings like hotels, hospital, church or a factory in the bonds are different was its successful business, and money making decides its value. Last but not the least, the inflated value of the land or the property itself along with its construction cost has to be taken into consideration when it comes to determining the value of a fixed bond investment.

 

Standards of the Bond Investments

Graham in his Security Analysis Summary quotes that the value of fixed assets is invariable anytime. The investor has to make sure that his business is flourishing over the land value to see success. It will act as a safety measure for his bonds. The market price is unquestionable, and unexpected most of the time. The stock equity carries assurance on bond safety. A minimum of 1:1 stock value ratio has to exist as per Graham’s suggestion to the investors. He advised that when the common stock is at its low, no bond investment has to be made. It will make more profit to buy the stock itself rather than the bond. Otherwise, it will be a very poor purchase. The fixed value investment should have a simple approach. The fixed value investment can offer gain as a reward for being right. But investors should also be prepared for the penalties that are attached to it. The asset and its position must be given utmost importance and attention keeping in mind its financial strength. The cash should be ample in hand. The capital used should be proportionate to the funded debts. The investor must be very clear that all the minimum standards and requirements have to be met to sign a safe bond. The stability of business also depends on the standards and principles of the bond investment.