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When investors want to have a long-term steady cash flow they will invest in tranches which has a longer time to mature. <\/p>
Whereas investors who want a more immediate but lucrative income stream will invest in tranches that have less time to maturity. <\/p>\n
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Investors can customize investment strategies to their specific needs with all tranches, regardless of interest and maturity. <\/p>
Likewise, banks and other financial institutions use tranches to attract investors across many different profile types.<\/p>\n
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Sometimes tranches add a twist to the complications of debt investing and present a problem to uninformed investors, who run the risk of selecting tranches that do not match their investment goals.<\/p>\n
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Sometimes the credit rating agencies can miscategorize tranches. Investors can be exposed to riskier assets than they intended to be because of being given a higher rating than they deserved. <\/p>
During the mortgage meltdown of 2007 and subsequent financial crisis, such mislabeling played an important part. <\/p>
Either because of incompetence, carelessness, or, for corrupt reasons the agencies labeled tranches containing junk bonds or sub-prime mortgages (below-investment-grade assets) as AAA or the equivalent.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t