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The Hindu Business Line  3 hrs ago  Comment 
The euro steadied slightly on Thursday, after sliding the previous day when the European Central Bank said it will no longer accept Greek bonds as collateral for its liquidity operations. ...
The Hindu Business Line  6 hrs ago  Comment 
The European Central Bank abruptly cancelled its acceptance of Greek bonds in return for funding on Wednesday, shifting the burden onto Athens’ central bank to finance its lenders and isolating Gr...
Wall Street Journal  7 hrs ago  Comment 
The European Central Bank said it would no longer accept Greek government bonds from banks seeking funding, damping plans by the new Greek government to ease its bailout conditions.
Finance Asia  8 hrs ago  Comment 
Chinese internet company raises a dual-tranche debt offering, obtaining a whopping $17 billion order book as sentiment in Asia US dollar credit markets continue to stabilise.
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Jutia Group  Feb 4  Comment 
[CNNMoney.com] - Here's another thing Apple excels at: market timing. The tech giant raised $6.5 billion Monday by selling its bonds on Wall Street. It's a huge sum for any company, but the move is especially notable because ... Read more on this....
The Economist  Feb 4  Comment 
MOST people agree that ratings agencies did a horrendous job evaluating the credit worthiness of bonds in the run-up to the financial crisis. But was that a crime? Two years ago, America’s Department of Justice brought a case against Standard &...
Benzinga  Feb 4  Comment 
Comments Made In Fox Business Interview © 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
MarketWatch  Feb 4  Comment 
Just when U.S. stocks were rebounding, news that the ECB is rejecting Greek bonds as collateral send stocks lower on Wednesday




 
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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