Bond Investing
When we are selecting bonds for our portfolios, we have a range of factors we evaluate: Our first check is the price. As mentioned above, we will almost always buy bonds at or below their maturity or call price. There are two reasons for this. One is perception, the other reality.
Dealing with investor sentiment in bond investing.
The perception issue is that, while it is generally the case that yield are higher on premium bonds, when a client looks at a statement the value seems to decrease as they march toward the ultimate maturity. No client likes to look at a value on the statement at a loss, it feels like they are losing wealth. You must trust me on this. If you buy a premium bond, unless you are planning to sell it—which has its own dynamics—it will go down in value as it advances toward its call or maturity price.