Beyond Equity Ideas

Preservation, income, and growth. At best, we can get two of three.

Think about a duck. It walks, it swims, it flies. However, the duck is not superior in any of those activities. It is simply good enough. In investing, “duck” instruments do not exist.

What about dividend stocks?

They are neither excellent growth prospects nor true income generators, and the principal is at risk. Bonds and preferred equity will do the job if the goal is income plus preservation; for growth, pick (common) equity and derivatives.

The price of duck versatility in investing is mediocrity.

If you want to achieve your market goals, you have to walk an extra mile. Do not settle for the most straightforward solution (nor for the most complex). Simply apply the optimal tool for the task.

Bonds are perfect for income generation and principal preservation at the expense of growth. Equity and derivatives are excellent growth instruments but come with higher default risk and no income. Set a goal and pay the price.

Five bond picks

Shipping, mining, and energy offer more than an adrenaline rush and sleepless nights. TheOldEconomy enterprises also issue attractive debt instruments for income-oriented investors.

To understand the power of bonds, we must go back to the basics. There are two types of assets: ownership and contract. The first category includes private and public equity, companies, and real estate. You, as investors, own the asset or a fraction of it; hence, you are entitled to receive (part of) future net profits.

The second group includes all types of fixed-income instruments. The relationship between borrower and lender is contractual. The debtor must pay predetermined interest and redeem the debt on maturity.

That said, TheOldEconomy bonds are not your typical IG debt instrument. Beware the following specifications:

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On the markets, we are wrong until proven otherwise. So, take the above thoughts with a grain of salt.

Everything described in this report has been created for educational purposes only. It does not constitute advice, recommendation, or counsel for investing in securities.

The opinions expressed in such publications are those of the author and are subject to change without notice. You are advised to do your own research and discuss your investments with financial advisers to understand whether any investment suits your needs and goals.