What are bonds?
A bond is a debt security, allowing you lend money to a government, municipality, corporation, federal agency or other entity known as the issuer. In return for investing in the band, the publisher that you pay a certain percentage of the interest to be paid when due. Return during the term of the bond and the nominal value of the bond (the principal)
Why invest in bonds?
It is always wise for an investor consisting of bonds, stocks and cash in varying percentages, depending on the individual circumstances and objectives to maintain. Diversified investment portfolio Bonds help you to diversify your portfolio, thereby, reducing your exposure to risk.
Investing in bonds provides a predictable stream of income and repayment of principal.
Bonds within three to five years will stick to the value they are worth. They offer some protection against shares related losses in a portfolio.
The negative side of investing in bonds:
All investment products have drawbacks. Bonds are no exception. Some of the negative aspects of investing in bonds:
Most bonds have a call option. This gives the issuer the right to call the bonds held by investors usually after five to ten years. When the issuer calls back a tape, it pays your principal amount, together with accrued interest and maybe a small premium. Issuers to choose when they can get money at an interest rate lower than the strategy of the bond in question.
When interest rates rise, the price at which the bond can be sold undergoes. If you are forced to sell because of pressing circumstances, the bond can not back the full amount invested resulting in losses.
Long-term bonds are usually not very stable and sometimes can not keep up with inflation.
Visit the Global Investment Institute and signup for our free Investing For Beginners E-Course at
Investment webmasters or publishers, please feel free to publish this article provided this reference is included and continue to actively use all the links.
No comments:
Post a Comment