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Username: PrettyWoman

Rating:
Guru Stars

Asked to: Heng Kim

Date Created: 11 May 2015
Category 17
Tag 191
Question <p>When is the best time to buy a fixed income security?</p>
Advice from Guru
Hello Pretty Woman,

The best time to buy a fixed income security is when interest rates and inflation are high but set to decline. In this scenario, a buyer of fixed income is buying at the point of maximum pessimism. These conditions coincide historically with the ideal entry point for bonds.

However, buying at this time is difficult due to fears inflation will erode the value of the security. Equities seem more attractive because they tend to do better in inflationary environments than fixed income. These extreme environments can shift the risk premiums from where they are traditionally. It is particularly unpleasant for anyone in retirement or on the verge of retirement.

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