Target said in a filing last week that the monies would be used for “general company reasons.”
While Target has seen a high short-term increase in sales as buyers stock up on necessities, the filing also noted the retailer’s uncertainties as a result of Covid-19:
“We are unable to forecast whether these sales trends will persist or whether new sales trendsincluding the prospect of major sales reductionswill develop, given the very fluid and uncertain outlook for consumer purchasing patterns and government policies linked to Covid-19.” COVID-19’s eventual impact on our business, financial condition, and financial performance, which could be considerable, is impossible to foresee due to the rapid development and fluidity of the situation.”
Target issued two sets of bonds: $1.5 billion in 2.25 percent interest-bearing notes due in 2025 and $1 billion in 2.65 percent interest-bearing notes due in 2030.
Nine institutional investors have agreed to acquire the $2.5 billion in bonds, according to the filing. Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, US Bancorp Investments Inc., and J.P. Morgan Securities LLC are among the investors.
According to the Wall Street Journal, a slew of corporations are “borrowing record amounts in the investment-grade bond market to amass cash before the full impact of the new coronavirus strikes the United States.” According to the publication, $73 billion in investment-grade bonds were issued last week, a new high.
Bonds provide investors with a stable, predictable yield without the risk of equities. It’s a means for businesses to get debt financing at lower rates than they’d get from a bank.
Target said in a business report last week that “unusually robust traffic and sales” have resulted from Covid-19. “Month-to-date in March, overall comparable sales are more than 20% over last year, with comparable sales in Essentials and Food & Beverage up more than 50%,” the business said in its March 25 update.
Where may bonds be purchased?
After they are issued, bonds can be bought and sold in the “secondary market.” While some bonds are traded on exchanges, the majority are exchanged over-the-counter between huge broker-dealers operating on behalf of their clients or themselves. The secondary market value of a bond is determined by its price and yield.
Where can you buy bonds over the internet?
The TreasuryDirect website is the only place where you may buy US government savings bonds. You might be eligible to buy savings bonds using your federal income tax refund.
Is it possible to purchase bonds from corporations?
- A brokerage business, bank, bond trader, or broker can help you buy corporate bonds on the primary market.
- On the over-the-counter market, some corporate bonds are exchanged and offer considerable liquidity.
- Before you invest, familiarize yourself with the fundamentals of corporate bonds, such as how they’re valued, the risks they entail, and how much interest they pay.
When is the best time to buy a bond?
It’s better to buy bonds when interest rates are high and peaking if your goal is to improve overall return and “you have some flexibility in either how much you invest or when you may invest.” “Rising interest rates can potentially be a tailwind” for long-term bond fund investors, according to Barrickman.
Is there a difference between a bond and a loan?
When a company needs money to continue or expand its operations, it usually has the option of taking out long-term loans or issuing bonds. Long-term loans and bonds function similarly. A corporation borrows money and agrees to repay it at a defined time and interest rate with each financing option.
A firm often borrows money from a bank when it takes out a loan. Though repayment periods vary, a corporation borrowing money will normally make periodic principal and interest payments to its lender over the course of the loan.
Bonds are comparable to loans, except that instead of borrowing from a bank or a single lending source, a corporation borrows from the general public. Bondholders get periodic interest payments from the issuing firm, usually twice a year, and the principle amount is repaid at the end of the bond’s term, or maturity date. Each of these financing methods has advantages and disadvantages.
When a corporation issues bonds, it is usually able to lock in a lower long-term interest rate than a bank would charge. The lower the borrowing company’s interest rate, the less the loan will cost.
Furthermore, when a corporation issues bonds rather than taking out a long-term loan, it has more freedom to operate as it sees proper. Bank loans often come with operational constraints that hinder a company’s capacity to expand physically and financially. Some banks, for example, bar borrowers from making additional purchases until their loans are fully returned. Bonds, on the other hand, have no restrictions on how they can be used.
Is a mutual fund a target fund?
The ideal way to save and invest for your retirement should be carefully researched. Target-date funds, often known as life-cycle funds, are an increasingly popular investing choice. Target-date funds are offered by approximately 90% of employer-sponsored defined contribution plans, including as 401(k) plans, according to one report by a big retirement plan provider.
Why Target-Date Funds?
Target-date funds are intended to assist in the management of investment risk. You choose a fund with a goal year that is the most similar to the year you plan to retire, such as a “2050 Fund.” The fund steadily reduces risk as you approach your retirement “target date” by adjusting the investments inside the fund. Even when the target date has been met, target-date funds are not without risk.
The Securities and Exchange Commission (SEC) conducted an investor study on target-date funds and discovered that many respondents had misconceptions about these products and the dangers they entail. The majority of investors polled, for example, were unaware that target-date funds do not guarantee income. Many investors were also unaware that funds with similar names could have very distinct investing and risk characteristics.
Target-date funds, like any investments, can lose money if the equities and bonds they own fall in value. And, while funds with the same goal dates may appear to be the same, they may have quite different investment strategies and asset allocations, which can alter how risky they are and how much they are worth at any one time, including when and after you retire.
How Target-Date Funds Work
Typically, target-date funds are designed as mutual funds. The objectives of a mutual fund, which are mentioned in the prospectus, define the specific investments that the fund makes. The majority of target-date funds are organized as “funds of funds,” which means they invest in other mutual funds rather than individual equities. A target-date fund, for example, could invest in an equities mutual fund, a bond fund, and a money market fund. Although this strategy is used by many target-date funds, others invest directly in individual equities and bonds. Furthermore, certain target-date funds are passively managed, which means they strive to imitate rather than beat their benchmarks, which include various stock, bond, and other indices.
Target-date funds may provide an easy approach for interested investors to maintain a diversified investment portfolio that rebalances over time to become less focused on prospective growth and more focused on generating income. For example, if the target date is far away, the target-date fund will be disproportionately weighted toward equity investments at firstthat is, more growth-oriented. As the goal date approaches, the investment mix shifts toward fixed-income or cash equivalent investments, such as bonds and Treasury securities, that seek to preserve capital and/or generate income.
The “glide path” refers to a target date fund’s gradual shift to more conservative investments. The glide route of a fund is usually meant to reduce investment risk over time, but target-date glide pathways can differ significantly from one fund to the next. Importantly, while stocks have historically produced a larger return than bonds and cash investments (albeit at a higher degree of risk), equities do not always beat bonds or are less risky than bonds. Stocks and bonds both include risk, and their returns and risk levels can fluctuate based on market and economic conditions, as well as how they are employed. Consequently, even though target-date funds are supposed to become more conservative as the target date approaches, investment risk occurs throughout the fund’s lifetime and is difficult to predict.
“To” or “Through” the Target Date
The goal of a target-date fund is to bring you “to” or “through” retirement. On the day of the fund’s name, a “to retirement” target-date fund will typically reach its most conservative asset allocation. After that date, the fund’s allocation usually stays the same into retirement.
After the goal date, a target-date fund designed to take an investor “into retirement” continues to rebalance and, in most cases, reaches its most conservative asset allocation. While these funds gradually reduce their exposure to equities throughout retirement, they may not reach their most conservative level until well after the individual has reached the age of 65.
Some target-date funds combine into distinct funds that focus on earning income once they reach their target dates. If your target-date fund is merged with another, examine the prospectus of the new fund to see if it meets your investing objectives and risk tolerance.
What You Should Know About Target-Date Funds
If you’re considering investing in a target-date fund or already have one, there are a few points to bear in mind:
- Losses are not guaranteed with target-date funds. Target-date funds invest in stocks and bonds in changing proportions. The value of these investments will change over time and may drop in value, leading your target-date fund investment to lose value as well. Target-date funds, on the other hand, are usually intended to be well-diversified assets. They may be less hazardous than individual stocks or bonds, your employer’s shares, or some focused sector funds in this regard (for instance, technology, manufacturing or international sectors).
- In different ways and at different times, funds with comparable target dates might move to more conservative investments. Target-date funds are designed to become more conservative over time, but their initial and ending asset allocations, as well as the rate at which they become more conservative (the glide path), can differ significantly from one fund to the next. This is why you must pay close attention to the glide route and ensure that you are comfortable with it and willing to accept the dangers that come with following it. Remember that there is no one-size-fits-all glide path, and that the glide path you choose will likely alter the risk and performance of your target-date fund.
- When you mix target-date funds with other investments, your total asset allocation changes. Target-date funds are meant to be used on their own. In fact, several investors mix target-date funds with other fund options provided by their retirement plan, as well as investments made outside of it. Take the time to understand how your money is invested, regardless of whatever assets you choose. Determine what percentage of your overall investment is in stocks, bonds, or cash, and recalculate this allocation on a regular basis to ensure you are satisfied with your allocations. You should be aware that mixing a target-date fund with other investments may result in increased risk.
- You haven’t saved enough to fulfill your objective just because you’ve met the deadline. Some investors believe that when they reach the fund’s target date, they will have enough money to retire, however this is untrue. Many factors, including the amount of contributions you make to the fund, the fund’s market performance, and other sources of retirement income accessible to you, will determine whether or not you meet your retirement savings goals.
Tips for Choosing a Target-Date Fund
Target-date funds were created to fill a critical need: assisting investors in building well-diversified portfolios that rebalance over time in preparation for retirement or other long-term objectives. Here are some pointers to ensure that the target-date fund you choose is, and continues to be, appropriate for you.
- Choose your goal date with caution. Investors often choose the target-date fund with the name that is closest to the date they want to retire. A 30-year-old investor who wants to retire at 65 would invest in a target-date fund with a goal date of around 35 years away. Similarly, a 50-year-old investor aiming to retire at the age of 70 might select a fund with a 20-year maturity date. When selecting a target-date fund, be sure to choose one that closely matches your retirement investment approach.
- Determine how much danger you’re willing to accept. Examine investment techniques when comparing funds with comparable target dates so you can choose the one that best matches your risk tolerance. Keep in mind that your circumstances may change over time, so you should review the fund’s performance on a regular basis to ensure it continues to fulfill your investing objectives.
- Check to see if the fund can get you to or through retirement. To prevent being startled by how the fund’s asset allocation varies over time, read the prospectus to understand what the target date actually implies.
- Keep an eye on your target-date fund’s glide path. Check your target-date fund’s investments on a regular basis to make sure the investment manager hasn’t modified the method the fund reallocates assets over time. If the glide path has altered, double-check that it still aligns with your retirement investment strategy and the overall level of risk you’re willing to take.
- If you’ve been automatically enrolled, pay heed. If your business has automatically registered you in a target-date fund as part of its defined contribution retirement savings plan, learn about it. You might find that a different plan option is more suited to your retirement savings goals depending on your circumstances.
- Maintain the balance of your “mixed” investments. Make sure you’re comfortable with your overall asset allocation if you invest in a target-date fund in addition to other funds and assets. Also, be ready to rebalance your total portfolio based on your needs on a regular basis.
- Examine the fees and expenses. FINRA’s Fund Analyzer allows you to compare different target-date fund fees and expenditures. Keep in mind that they have an impact on the long-term performance of your investments.
Learn everything there is to know about your target-date fund. It may help you avoid unpleasant surprises in the future and, as a result, be better prepared for retirement.
Is a mutual fund a Target Retirement Fund?
Target date funds are mutual funds that are designed to make investing in retirement easier. You acquire a diversified mix of domestic and international equities and bonds when you buy a single fund. Furthermore, as the client approaches retirement, target date funds shift their asset allocation from stocks to bonds.
Is it possible for me to invest in target-date funds?
Target-date funds can be purchased in a variety of ways. The most frequent way is to invest in target-date funds through a workplace 401(k). This type of fund is only available through some employers’ 401(k) plans. A target-date fund can also be purchased through an IRA, either regular or Roth. These choices are all tax-advantaged. You might also buy a target-date fund from an internet broker, but they are likely to be taxable, so avoid them if at all possible.
You can also go to a financial services business that offers target-date funds, such as Vanguard, Fidelity, or Charles Schwab. “Choosing a Fidelity target-date fund is typically the easiest thing to do if you have a Fidelity account,” Novaes adds.
Management investment, according to Morningstar, is a significant data element to consider when selecting a target-date fund. This metric indicates if fund managers have put their own money into the fund, and it’s a good predictor of whether the fund will outperform its peers.
What is the value of a $50 savings bond?
A $50 EE bond, for example, costs $50. EE bonds are available in any denomination up to the penny for $25 or more. A $50.23 bond, for example, could be purchased.