Fixed income and cash
18 articles
How to Assess High-Yield Fixed-Income Offers
A fixed-income offer paying noticeably more than everything comparable is not a better deal. It is a different deal, and the extra yield is the price you are being paid for a risk. The only useful question is which risk, and whether the payment is enough.
6 min read
How Bond Duration Measures Interest-Rate Risk
Duration is the single number that tells you how much a bond or a bond fund will move when rates change. It is quoted in years, which makes almost everybody misread it as a maturity date.
5 min read
How to Match Fixed-Income Risk to an Investment Horizon
Most losses in fixed income come from a mismatch rather than a bad product — money needed soon held in something that moves, or money with decades to run held in cash. Matching the two is the single decision that prevents most of it.
7 min read
How to Assess the Risk of a Corporate Fixed Deposit
A corporate fixed deposit shares a name with a bank deposit and very little else. It is an unsecured loan to a company, and the extra interest is precisely the payment for that difference.
6 min read
How Credit Risk Can Cause Losses in Fixed-Income Investments
Interest-rate losses reverse if you wait. Credit losses do not. That single asymmetry is the most important thing to understand about lending money to anyone other than the government.
6 min read
How Dynamic Bond Funds Change Interest-Rate Risk
A dynamic bond fund varies how long it lends for, according to a manager's view on interest rates. That flexibility is the product — and it means the one number you would normally use to know what you own is not fixed.
5 min read
Fixed Deposit or Debt Fund: What Risks and Trade-Offs Differ?
These are usually compared on which returns more, which is the least reliable basis for choosing. They are structurally different arrangements, and the differences that matter are about certainty, access and what happens when things go wrong.
7 min read
How Bonds Work: Price, Yield, Maturity and Default Risk
A bond is a loan you can sell. Almost everything confusing about bonds follows from that one fact — including why the price falls when rates rise, and why a bond can lose you money without anyone defaulting.
6 min read
How Debt Mutual Funds Work
A debt fund is a shared portfolio of loans, valued every day at what those loans would fetch. Understanding that sentence explains both why the value moves and why "debt fund" is not a synonym for "safe".
7 min read
How Much Emergency Fund Do You Need?
The usual answer is a number of months. The right answer is however long it would take your household to recover from losing its income, and for some households that is far longer than any general rule suggests.
6 min read
Why Perpetual Bonds Can Behave Differently from Fixed Deposits
A perpetual bond has no maturity date, pays a high coupon, and is often sold to people comparing it with a deposit. Almost every feature that makes the coupon attractive is a risk the buyer has accepted without noticing.
5 min read
How to Prepare Financially for a Sudden Loss of Income
Almost everything that makes a job loss survivable has to be arranged while you still have the job. The window for preparing closes on the day you need the preparation.
6 min read
How Repo-Rate Changes Affect Loans and Deposits
A change in the policy rate reaches your loan and your deposit through different routes, at different speeds, and not always in equal measure. Knowing which route yours travels explains why your EMI moved and your deposit rate did not.
6 min read
What Role Should Bonds Play in a Portfolio?
Bonds are usually justified as the part that returns less so the portfolio moves less. That understates them. Their real job is to be the money you can spend when equities are down — which is a different requirement, and it changes which bonds you should hold.
5 min read
Where Can You Keep Short-Term Cash — and What Risks Remain?
Money you might need soon has one job: to be there, in full, on the day you ask for it. Every option for holding it involves giving up a little of that reliability in exchange for a little more yield, and the trade is worse than it looks.
6 min read
How to Measure and Improve Financial Liquidity
Liquidity is not how much you have. It is how much you could actually produce, in full, within the time you have to produce it — and the gap between those two figures is where financial trouble starts.
7 min read
What the Bond Yield Curve Shows — and What It Cannot Predict
The yield curve is a picture of what lending costs at different lengths of time. It is genuinely informative about the present and routinely oversold as a forecast of the future.
7 min read
Why Gilt Funds Are Not Risk-Free
A gilt fund lends only to the government, so it carries no meaningful default risk. That is a real advantage and it is also the source of the confusion — because the risk gilt funds actually carry is the one nobody removed.
8 min read