Articles
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Have you ever found yourself short of cash and wanted to buy something today? You tell yourself, if you just had a faster computer you could learn more and get things done much quicker, leaving more time for other productive activities. Ever borrowed the needed money then paid it back with interest, say by using a credit card?
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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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Few investments offer as objective an estimate of risk as bonds. Because of some fixed characteristics - par (face value, repaid at maturity), coupon (interest rate, percentage paid in semi-annual payments on the par) and maturity (date principal is repaid) - predicting bond values and risk with some confidence is as much science as art.
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Every bond carries some risk that the issuer will default on repayment of the principal or suspend interest payments. Once that risk is measured (see 'Measuring Risk' elsewhere in this series), then what?
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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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Government Bonds - Risks and Rewards
It's often said that government bonds represent one of the lowest possible risks for an investor. In general, true - but much depends on which government issues them and which investor is buying.
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Ask (Asked Price) The lowest round-lot price a broker will offer to sell a security. Auction The issuance of new Treasury bills, notes and bonds at stated intervals by the Federal Reserve Bank of the U.S.
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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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Unlike the stock market, there's no central exchange for trading bonds. Nevertheless, the process is almost as easy as trading equities (stocks). Acquire, if you haven't already, a brokerage account - such as the ones from a full-service broker or one of the many on-line only trading accounts. In some cases, it'll be necessary to phone rather than place an order over the Internet.
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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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Bond Analysis — Science or Numerology? Part II — Evaluating Benefits
In Part I, we examined some of the risks associated with bond investing. Here we'll look more quantitatively at evaluating the potential rewards. One of the most common and obviously useful quantitative techniques is yield calculations.
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Bond Analysis - Science or Numerology? Part I - Evaluating Risks
There are more methods for analyzing bonds than there are bonds, or so it seems. Even so, some are clearly essential to evaluating risk and potential returns. We'll look at a few here.
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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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If you are a regular investor in bonds, you will definitely have known by now that there are some bonds that do not actually give out any payments as interest. These bonds pay interest only on the maturity of the instrument instead of regular payouts like other bonds. Hence, they are called as Zero Coupon Bonds. In every zero coupon bond, interest is accrued annually. This accruing of interest is necessary, because conventionally, the annual increase in the value of the zero coupon bonds in question are reported as interest earned.
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5 Ways To Protect Your Bond Portfolio From Rising Interest Rates
The Federal Reserve recently raised its target federal funds rate for the first time since March 2000. This could be just the tip of the iceberg, though, as many experts believe rising inflation and a strengthening economy will spur continued rate hikes for the foreseeable future.
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Investing in Bonds for a Secured Future
There may have been more than one occasion when you might have had to borrow money from a friend: at the coffee shop, in the office, or even for the cab service. When you run out of money, borrowing is usually your only way out. Juxtaposing the same with big corporations and the federal government, one would find it is not that easy for them. Not only have they to repay the money owed, but to top that amount with interest. That is why companies are made to sign a ‘bond’ by law, promising the repayment of the money owed. It is a formal kind of security to ensure due payment.
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When a corporation needs to find extra money, one of the ways they raise funds is through selling bonds. You are basically loaning the company money when you purchase a corporate bond.
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Corporate bonds are IOUs issued by private and public corporations to raise capital. Corporate bond promises to pay back your entire principal amount along with interest. They offer higher interests than government or municipal bonds.
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Is It Safe To Invest In Corporate Bonds?
Corporate bonds are like lending money or providing a loan to a business. The lender loans money to a company or corporation, in return the corporation pays you interest on the money that you have lent them. The company that has borrowed the money commits to you or gives you their promise that they will pay back the money borrowed on a pre-arranged date. This is called the maturity date.
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Bond Investing Explained - Plain And Simple
With all the types of investments we have these days, it can be frustrating to choose one that is right for you. It will take time to learn about different investments, unless of course you go with the "eeny meenie miny mo" method and just pick one. That, however, may lead to a problem or 2. Your best bet is to look up some information about different investments, and on an investment in particular, bonds. A bond is a type of security that pays a fixed amount of interest at a regular interval over a certain period of time.
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National Savings (NS) are investment products provided by the government and are therefore a way for the government to borrow from the public. They are mainly longer term investments. There are minimum and maximum investment amounts for each.
