Investors have the option to either invest the proceeds from RQD into a subsequent maturity of an RBC Target Maturity Corporate Bond ETF or to utilize the proceeds in a ladder strategy to help manage interest rate and reinvestment risk
He outlines principles that can be applied at any time, in any investment cycle, and at any age, and examines the bond market, what it is, how it functions, the various individual products, and how to use the market profitably, as well as key strategies, how to find and choose an investment advisor, the mathematics of bonds, the concept of duration, how to forecast interest rates, bonds for the speculator, retirement planning, reinvestment risk
, bond mutual funds, and guaranteed investment certificates (GICs) vs.
One way plan sponsors can avoid reinvestment risk
is to put the collateral into very safe investments, like money market funds.
Minimize interest-rate reinvestment risk
in lower interest-rate environments, since the higher rates are "locked in" to the longer maturities
By matching the duration of the bond to the investment horizon, interest rate and reinvestment risk
can be offset.
The advantage of the pre-funding scenario is that it transfers future funding risk to the capital markets at the inception of the transaction but has the disadvantage of reinvestment risk
(negative carry) until the funds are fully deployed in the reinsurance trust.
The risks of long-term investments are market risk (the risk that changes in interest rates will reduce the value of the security), reinvestment risk
(the risk that the investor will have to reinvest funds at a lower rate), and illiquidity risk (the risk that the security cannot be sold prior to maturity without incurring a significant loss).
Inflation-indexed bonds may have significant reinvestment risk
This policy increased the reinvestment risk
of M2 deposits, i.
This requires borrowers that are paying off loans early to compensate lenders for lost interest as well as reinvestment risk
occurs when interest payments during the bond term cannot be reinvested at the market rate.
No material reinvestment risk
is associated with any funds awaiting distribution to the holders of the security.