RIT, I’m instinctively drawn to your seductive dream of a simple world, but I think Ken is right, we have to keep our wits about us. The moment we stop engaging, stop being involved, trust ‘experts’ to look after us like children, is the moment we’re gonna get robbed blind. I don’t think the average investor does want to quietly simmer their savings in an index fund. If the bulk of the press and the balance of the market is any guide, the average investor hopes to make a killing by hooking up with the latest hot fund as recommended by the Great Oz.
Another example is a convertible bond , which is ideal for companies that want to issue debt that can be converted to equity in exchange for a higher return. The goal of the issuer is to drive demand for a bond without increasing the interest rate or the amount it must pay for the debt. Different features can be added to the convertible bond. Some convertible bonds offer principal protection. Other convertible bonds offer increased income in exchange for a lower conversion factor. These features act as incentives for bondholders . Other examples include covered call writing , high-yield bond portfolios, funds of hedge funds and other derivative structures.