Advanced English Dialogue for Business – Negative carry

Listen to a Business English Dialogue About Negative carry

Samantha: Hi Lola, have you heard about negative carry?

Lola: No, I haven’t. What is it?

Samantha: Negative carry occurs when the cost of holding an investment exceeds the income generated from it, resulting in a net loss.

Lola: Oh, I see. So, it’s like when the expenses associated with an investment outweigh the returns?

Samantha: Exactly. Negative carry can occur in various investments, such as borrowing money at a higher interest rate than the return earned on the investment.

Lola: Are there any strategies investors use to mitigate negative carry?

Samantha: Yes, some investors may employ hedging strategies or adjust their portfolio allocations to minimize negative carry.

Lola: I see. So, it’s important for investors to carefully assess the potential risks and returns of their investments?

Samantha: Yes, that’s crucial. Understanding the concept of negative carry can help investors make more informed decisions and manage their investment portfolios effectively.

Lola: Are there any specific types of investments that are more prone to negative carry?

Samantha: Investments with fixed costs or expenses, such as certain types of bonds or real estate, may be more susceptible to negative carry if the returns are insufficient to cover the costs.

Lola: I understand. So, investors should consider the cost structure and potential returns of an investment before committing capital?

Samantha: Yes, that’s a good approach. Evaluating the potential for negative carry is an important aspect of investment analysis and risk management.

Lola: Thanks for explaining, Samantha.

Samantha: No problem, Lola. Negative carry is an important concept for investors to understand when making investment decisions.