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Investors would consider $0.50 return on $1 over 10 years to be a loss. Money isn't free and that same dollar invested in an sp 500 index fund would have yielde
by jjeaff 4y ago
Investors would consider $0.50 return on $1 over 10 years to be a loss. Money isn't free and that same dollar invested in an sp 500 index fund would have yielded $2.50 for that same time period.
- prepend 4y agoIt depends on the investors. Yes, the s&p returned more in this period, it usually does, but not always. There’s reasons why other investments exist and one is the risk of the investment. Municipal bonds are really stable and some investors just want predictable returns and will sacrifice overall returns for stability and lower risk. Oil investments aren’t municipal bonds, but I expect most oil investors want stable returns.
- dghlsakjg 4y agoYou are misusing the terms yield and return, and seem to have a misunderstanding of how a muni bond works. A muni bond would have yielded $.50, but you still have the underlying asset, so it isn't a loss, its a guaranteed return of 50% every 10 yrs, until the bond matures (you get your $1 back) or is defaulted on. The SP500 doesn't guarantee anything, and there are 10 yr periods where it has negative growth.
- jjeaff 3y agoNo, I used the term yield correctly. $1 in the sp 500 over that time period would have increased to $3.50. Or a yield of $2.50 while maintaining the underlying asset of $1. As for it being a muni bond, the risk is low but still there. Municipalities do in fact default sometimes.