Today, the yields on ten-year Treasury bonds are at a fifty-year low, and no period prior to the last few years reflects yields that even come close. From 1962 to 2005, the lowest the 10-year Treasury bond yield ever got to was just below 4%, more than twice the current yield.
The chart below shows how unusual our current environment is. The vertical axis is the yield from 10-year Treasury Bonds and the horizontal axis is time and we are looking at a period from 1962 to present. From 1980 to today, we have seen the yield of 10-year Treasury bonds go from about 12% per year to below 2%. The 10-year Treasury yield is considered a benchmark measure of bond yield and interest rates. The Fed funds rate and the 10-year bond yield are very closely tied to one another. For another illustration of how interest rates, the Fed funds rate and 10-year bond yield are related, see here. Continue reading →
There are a large number of statistical measures available for looking at a mutual fund, ETF, stock or a combination of these in the total portfolio.
For an individual investor, what are the important measures and what do they mean? Over the next two days I will highlight the measures I think are critical to understanding and managing your investing portfolio.
Today, I’ll start with the best measurement of risk in any investment – its volatility. Continue reading →
The concept of leverage is crucially important throughout finance, but many investors may not have a real grasp on the meaning of this term. Leverage refers to the practice of borrowing money to increase your exposure to a specific investment. A home mortgage is a form of leverage. If you put down 20% when you buy a home and the house value appreciates by 20%, your actual return on your investment is 100%. Such is the power of leverage. On the other hand, if the price of your house drops by 20%, you have lost 100% of your investment. Continue reading →