SLC Management and its affiliated investment managers will offer their alternative investment strategies to the U.S. high net worth market.
Helping investors meet their current cash flow and future capital appreciation goals.
Unlimited access to our bond offerings and dedicated, personal support
Customized portfolios selected and managed by professional managers
Partnering with select institutional managers
Expert advice, ongoing trade support, and transparent pricing
An emphasis on solid investment disciplines and specific asset classes
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Financial Industry Insights from Advisors Asset Management
On July 20, 2015
AAM Viewpoints - Investing in Fixed Income Bonds, Volatility and Bond Maturities
The typical investor has been taught that bonds are a safe investment. They are taught that bonds with investment grade credit ratings will mature at par or face value, barring a default, and will pay the stated coupon. The investor can sleep well at night. This is all generally accurate. We all know the merits of many bond funds: diversification, professional management, not a large initial investment required, etc. What is not discussed are things like a bond fund not typically having a maturity date. When interest rates rise, the value of a bond fund should generally go down. The investor will still receive interest payments which could increase with rates rising, but there is no maturity date in sight where the investor gets their principal back without selling or redeeming their interest in the fund. For many this is an important consideration. What does that really mean with regards to rising interest rates? One example is the 30-year Treasury that has a 2.5% coupon traded around 100 on 3/24/2015 and around 90 on 5/6/2015, a month and a half later. On paper, that is a 10% loss in value – pretty volatile. So if it is important to an investor to know they have a date when they will receive their principal back, typical bond funds may not be the answer.
For those who want maturity dates on their bond investments, here are a couple options.
Unit Investment Trusts (UITs) are sold only by prospectus. UITs are subject to risks associated with market volatility including potential loss of principal. Investors should consider each investment's objectives, risks, charges and expenses carefully. Investors are cautioned to read the prospectus before investing. Prices, quantities, yields and availability are subject to change without notice. Cash flows may be intermittent on certain securities. Unit values of a UIT will fluctuate with the portfolio of underlying securities and may be worth more or less than the original purchase price at the time of redemption. There is no guarantee that the objective of a UIT will be achieved.
Different investors have different considerations that are important. If a maturity date is important on your bond investments, understanding the investment vehicle may be as important as the individual bonds that make up your investment.
CRN: 2015-0519-4760 R
Advisors Asset Management, Inc. is a unit investment trust sponsor. This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information at https://www.aamlive.com/legal/commentary-disclosures. For additional commentary or financial resources, please visit www.aamlive.com.
Unit Investment Trusts (UITs) are sold only by prospectus. You should consider the trust’s investment objectives, risks, charges and expenses carefully before investing. Contact your financial professional or visit Advisors Asset Management online at www.aamlive.com/uit to obtain a prospectus, which contains this and other information about the trust. Read it carefully before you invest or send any money.
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