Editor’s note: This is the final of a three-part series on the basics of investing money.
• Reinvestment risk — The yield-to-maturity calculation assumes reinvestment of semi-annual income at the stated or coupon rate. A zero-coupon bond is exempt from reinvestment risk, because it is structured to compound at the stated rate of return. (More on zero-coupon bonds below.)
On Friday, thousands of people waited in line for hours, some even camped out, just to own the coveted iPhone 5 on the day of its release, instead of having to wait a few weeks for it to come in the mail or restock in the stores.
I am perplexed by this behavior for multiple reasons. I realize I am not as technologically in tune with the times as most people my age — I was one of the last of my friends to get a Facebook account — but even some of the most-up-to-date consumers must stop and scratch their heads at the idea of camping out for an iPhone. Even while driving to work on Friday morning, I heard Kidd Kraddick and his co-host discussing one individual’s attempt to sell his spot in line for roughly 1,000 British pounds. That is the equivalent to about $1,600. That is ludicrous.
“Don’t put all your eggs in one basket.” If this everyday piece of advice comes to mind when thinking about your investments, then you may already understand the importance of a diversified portfolio.
But even the most carefully composed investment portfolios can get out of balance from time to time. To make sure your portfolio stays on track to helping you reach your goals, it’s important to take the time regularly to rebalance your portfolio to make sure it’s still in line with your investment objectives.