In relation to standard I©(misrepresentation), are you allowed to guarantee returns on a risk free investment like t-bills?
yes
It is always best not to guarantee rates of return, even on T-bills because if they are sold prematurely they can realize a different rate of return.
GETMCKINLEYLAID Wrote: ------------------------------------------------------- > It is always best not to guarantee rates of > return, even on T-bills because if they are sold > prematurely they can realize a different rate of > return. but im pretty sure according to the ethics guidelines, this is one area where you can
You can guarantee return of principal or payment of coupons, but you cannot guarantee against a decline in value of the investment. Treasuries, including the associated coupons, are “guaranteed” to not default. However, the bonds will decline in value if rates increase.
http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2005.n3.4000 If you look at the bottom of page 25 it doesn not prohibit candidates from distributing info on products that have guarantees built in, or where an institution guarantees to cover losses. While the govt guarantees that it will not default (client approved) the govt makes no guarantee concerning ROR
So couldn’t you gurantee a ROR if its held to maturity? That’s different than just saying it’s guranteed to yield X, with no time period to maturity.
in a perfect world where people bought at issue and held to maturity then yes, but since there is no guarantee that either take place it is irresponsible to do so, hence why it is not permissible under CFA standards. Futhermore, since we are all spending well over 500 hours studying for an exam that about half of us will fail I gather that none of us are wealthy enough to put vast fortunes in Tbills and live off the yield so why bother with govt debt anyway?
Also, speaking of treasuries a buddy of mine recently heard some guy who owned a bunch of them was speaking to traders about markets 2 months ago when one trader said, “treasuries don’t pay sh%t” the speaker promptly responded “they do if you have enough of them.”
Yeah, but the reply to the trader would be, at least i wont lose 30% of my portfolio. There was an economics Phd interviewed in BW a couple of issues ago who said he isnt investing any of his money in equities any more. Just bonds, and continuing to work. He doesnt have the confidence in equity in the market, and with all these HF managers using profit strategies based on volatility, who could blame him? I wish I could remember his name, perhaps someone else remembers the interview.
true, if you track it down please post i’d be interested in reading it.