Articles » Bond Market
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Bonds — Tax Considerations For Investors
One reason stocks are more popular than bonds is that the latter are more complicated. Ironic, considering their risk and returns bonds are easier to judge and predict with confidence.
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'Junk' bonds - more politely known as high-yield bonds - acquired the name as a consequence of their low rating by the major agencies and their high rate of default. 'Default' is the failure to repay principal and/or suspension of interest payments.
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First, a confession: Interest rates are unpredictable. But then, you knew that already. Fortunately, they're not entirely unpredictable. Good bets are possible.
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Eurobonds, Not Just For Europeans
When even the Iranian government floats Eurobonds, you know there's something funny about the term. There's a difference between a eurobond and a foreign bond, even from the perspective of a non-European. A Eurobond is a bond issued and traded in a country other than the one in which it's currency is denominated.
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Research on bonds fills volumes. Or these days, the hard drives of web servers. Nowhere else in the investing world can the interested investor get more helpful information than that available from the various bond rating agencies.
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Bonds aren't the easiest instrument to understand or trade. They have more predictable characteristics — owing to their fixed maturity (principal repayment date) and coupon (interest rate). But those predictions are fairly technical and sometimes even difficult to follow for the beginner.
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The Bond Market and How You Can Benefit
In the investment world, there are two words we hear more than any others—stocks and bonds. While each can offer their own advantages and disadvantages, both should be included in your portfolio. As a general rule, stocks have outperformed bonds since 1926; returning 10.4 percent against government bonds’ 5.4 percent showing.
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A bond is a debt obligation or security, where the the holder or buyer expects the holder to repay the principal and interest at maturity (a date in the future). The bond market is a financial market where these bonds are bought and sold. To get an estimate of the size of these debt securities markets you should bear in mind that the international bond market is approximately $45 trillion and the size of U.S. bond market debt is about $25.2 trillion.
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Bonds, Stocks, and Commodities
The U.S. economy had a quick and massive "Creative-Destruction" process from 2000-02 that made Information-Age firms more efficient and freed-up resources for emerging industries. The U.S. had slow growth from 2001-03, after the mild 2001 recession. However, real growth was around 4% for three years, in the mid 2000s, and has slowed recently, since the Fed is attempting to achieve a soft-landing, e.g. roughly 2 1/2% real growth.
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You need enough capital to keep yourself in the market, to allow to yourself to keep your day trading system going. Most day traders have their favorite markets. News provides the majority of opportunities day traders capitalize on.
