How to Invest in Floating Rate Notes
- 1). Identify how much risk capital you can commit to your investment in floating rate note securities. Risk capital is the amount of money you will need to place on deposit in a brokerage account or with your financial planner that if you were to lose as a result of your investment in floating rate securities will not result in severe financial hardship.
- 2). Determine the rate of return you desire from your floating rate security investment. Rate of return is the percentage rate of growth you desire over the life of your investment in floating rate securities. Evaluate the various money market interest rates and floating rate mutual funds being offered at the time for guidance in determining the type of return you can hope to earn on your investment.
- 3). Identify the financial instruments best suited to your risk capital and investment rate of return requirements. Floating rate securities mutual funds such as Fidelity's Floating Rate High Income, ticker symbol FFRHX, Blackrock's Senior Floating Rate II, ticker symbol XMPCX, and PIMCO's Floating Income A, ticker symbol PFIAX, offer a diversified, low-cost investment. Qualified brokerages will allow you to purchase individual floating rate securities provided you meet their minimum requirements.
- 4). Deposit your risk capital with your broker or financial planner. Remit your funds through the postal service or by electronic wire transfer.
- 5). Invest your risk capital by purchasing the floating rate securities and or mutual funds you have chosen based on your investment requirements.
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