SeekingAlpha  40 min ago  Comment 
By Kraken: Sears (NASDAQ:SHLD) has reported another disappointing quarter. The revenue for the company fell 9.7% over the prior year. This is the ninth straight quarterly loss for the company, and it doesn't seem like things will let up anytime...
SeekingAlpha  1 hr ago  Comment 
By Alpha Architect: By Wesley R. Gray, Ph.D. In our last post, we looked at tactical allocation using valuation metrics and trend-following measures. Our conclusion from the analysis is that discerning robust trading signals based...
MarketWatch  1 hr ago  Comment 
Goldman Sachs could agree to pay more than $1 billion over mortgage bonds it sold ahead of the financial crisis.
Clusterstock  2 hrs ago  Comment 
The July FOMC minutes showed that a rising number of participants were willing to raise rates sooner. Though some point out that hawks have more of a voice in the minutes than on the committee — since the voting members of the Federal Open...  3 hrs ago  Comment 
WASHINGTON (dpa-AFX) - Treasuries showed a lack of direction throughout the trading day on Friday before eventually ending the session nearly flat. Bond prices spent much of the session bouncing back and forth across the unchanged line....
SeekingAlpha  3 hrs ago  Comment 
By The Motley Monetarist: Confidence does not reign supreme on the ability of the Argentine government to honor its debt, whether restructured or holdover. The Argentine bond market fell today, after news that the government plans to allow...
SeekingAlpha  3 hrs ago  Comment 
By Mohamed El-Erian: Central bankers, a group of largely independent technocrats, wield more power over the fates of politicians, investors and regular folk than ever before. In the absence of government action, they are bearing most of the burden...
Reuters  7 hrs ago  Comment 
* Weaker change of control covenants increase credit risks


A bond is a type of debt. It's a loan from an investor to an institution, and in exchange the investor collects a predetermined interest rate. When a company needs capital to expand its business, it issues bonds to the public. Investors buy them with the understanding that they will collect the original principal plus interest when the bond matures at a set date. Federal, state, and municipal governments issue bonds for a similar purpose, to raise money for projects and public programs.

Types of Bonds

Bonds or Stocks?

Making the choice between stocks and bonds can be complex. In general, though, the key consideration is your own planning horizon.

Bonds are, in general, more predictable than stocks, and (on average and in general) give you lower returns. If you believe you'll need predictable access to money over, say, a 20-year period, you may be better off with bonds. For example, if you want to put aside a specific amount of money for a grandchild, expecting that money to be available for college in eighteen years, and not expecting to have other capital available. Insurance companies invest heavily in bonds for just this reason: it matches predictable liabilities (future insurance claims) against predictable cash flows (principal and interest).

Some bonds have tax advantages; for example, municipal bonds are typically exempt from state taxes in the state that issued them, as well as federal taxes. This can make them more attractive, though often you will find that the market has arbitraged away the difference, and that corporate (that is, taxable) bonds carry a higher gross yield -- and the same net yield after taxes. Although many investors invest in munis for just this reason -- they "don't like the taxman" -- they may not be making the optimum investment choice.

Bonds are not riskless, however. They carry credit risk ("will I get my money back?"), prepayment risk, liquidity risk and interest-rate risk. Many bonds give the bond issuer the right to repay the bond early -- which happens more often when rates are low, in other words, just when you don't want your money back. This is prepayment risk. Liquidity risk is the risk that you won't find a good price for your bond when you want to sell it -- because there are so many more bond issuers than stock issuers, and because bonds are not exchange-traded, there may not be a willing buyer. Interest-rate risk is the opposite of prepayment risk: when rates go up, the value of your bond will drop (it drops more, the further away it is from maturity). If your circumstances change and you need to sell the bond before maturity, you can lose capital that you would otherwise receive, if you held the bond to maturity.

Read More

A how to on investing in bonds

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki