RECENT NEWS
Motley Fool  2 hrs ago  Comment 
A rising tide of concern about the bond market is starting to gain traction in the investing community.
MarketWatch  3 hrs ago  Comment 
Treasury yields rise Thursday after a strong weekly jobless report, leaving them little-changed from the previous day’s closing levels.
Yahoo  4 hrs ago  Comment 
The former Treasury secretary said regulators should make a priority of addressing the problems of bond market liquidity, brought on by efforts to make institutions safer after the crisis.
The Economic Times  5 hrs ago  Comment 
SEBI said the facility to buy & sell govt bonds the same day would be applicable on the entire $30 bn ceiling on govt debt purchases by foreign investors.
Wall Street Journal  6 hrs ago  Comment 
Investors holding $10 billion of Ukrainian debt have joined forces to develop a restructuring plan which won't involve a reduction in the principal value of the bonds.
The Economic Times  6 hrs ago  Comment 
"It is a reaffirmation of the macro improvement that we have seen thanks to combined efforts by both the RBI and the Modi government."
The Economic Times  7 hrs ago  Comment 
"However, foreign investors had perhaps already factored in a large part of it and therefore, we may not see too much of incremental inflow coming from abroad."
Financial Times  9 hrs ago  Comment 
Greek bond yields slide amid investor relief over payment
The Times of India  12 hrs ago  Comment 
Investors in US-based mutual funds pulled $1.3 billion out of bond funds in the week ended April 1 as tax deadlines approached for retail investors, data from the Investment Company Institute showed on Wednesday.
Wall Street Journal  Apr 8  Comment 
Switzerland sold 10-year bonds that investors are actually paying to hold, while Mexico lined up a rare transaction to borrow euros it promised to repay a century from now.




 
TOP CONTRIBUTORS

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.

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A how to on investing in bonds

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