BONDS: Zero Coupon [Pros & Cons]

Posted on November 12, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

DEFINITIONS

By Staff Reporters

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Zero-coupon securities (aka zeros) are debt securities [bonds] that, unlike most of their debt security counterparts, make no periodic interest payments to investors. Instead, they are sold at a deep discount (with an imputed interest rate priced into the discount), then redeemed for their full face value at maturity.

CITE: https://www.r2library.com/Resource/Title/0826102549

When held to maturity, a zero’s entire return comes from the difference between its purchase price and its value at maturity.

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Understanding Managed Bond Funds

Posted on March 29, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Considerations for the Physician-Investor

By Staff Reportersdhimc-book11

Proper diversification among types of bonds is an important investment objective. The maturity schedule and the number of issuers are often very important, along with the issuers’ creditworthiness.

Individual Constraints

The constraints on purchases of individual bond issues often put the physician-investor at a disadvantage. Minimum amounts of investments are imposed by the marketplace or the issuer. Many doctor-investors find it impractical to meet these requirements and also obtain proper diversification (the amount of portfolio funds committed to debt-based securities simply is not large enough to obtain diversification and at the same time meet the other limitations). Accordingly, many investors find mutual funds devoted to debt-based securities most effective in achieving diversification.

A Large Marketplace

The mutual fund marketplace has many types of bond funds, and diversification can be obtained quite easily. The investor with a relatively reduced amount to invest in debt-based securities should consider using mutual funds.

Assessment

For more terminology information, please refer to the Dictionary of Health Economics and Finance.

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Conclusion

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