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Reuters  11 hrs ago  Comment 
NEW YORK, July 17 (IFR) - The US high-grade market proved its resilience in the wake of global market volatility this week, managing to set a new record for July even as worries about a Greek default...
The Economic Times  Jul 17  Comment 
newratings.com  Jul 17  Comment 
Water Bonds Plc Notice of General Meeting 17(th) July 2015 Notice is given that a General Meeting of Water Bonds plc will be held on Wednesday 5 August 2015 at 21 Tideway Yard, 125...
MarketWatch  Jul 17  Comment 
Treasury yields finish slightly lower Friday, as investors assess mixed U.S. economic data along with a flurry of earning reports, amid positive news coming out of the eurozone.
Reuters  Jul 17  Comment 
India's banks are planning to slow purchases of government securities until the end of September, executives and analysts say, after a sharp rise in yields that will pressure bottom lines already weighed down by bad loans.
Wall Street Journal  Jul 17  Comment 
More investors are becoming concerned over a possible crisis brewing in the expanding world of exchange-traded bond funds.
The Economic Times  Jul 16  Comment 
I started my career as a consultant at McKinsey’s New York City office, where I worked on client engagements for several global financial institutions.
Clusterstock  Jul 16  Comment 
NEW YORK (Reuters) - A federal judge on Thursday said Chesapeake Energy Corp must pay an additional $59.1 million to some investors whose bonds it redeemed early, boosting the natural gas company's total payout to $438.7 million. U.S. District...
Yahoo  Jul 16  Comment 
Goldman is among the banks targeted by a federal-state working group to go after misconduct in the pooling and sale of mortgage securities in the run-up to the financial crisis. JPMorgan Chase & Co has already agreed to settle for $13 billion,...




 
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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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