RECENT NEWS
Benzinga  1 hr ago  Comment 
Hartford Funds, the fund-issuing arm of Hartford Financial Services Group Inc. (NYSE: HIG), expanded its exchange-traded funds lineup Wednesday with the launches of two actively managed fixed income funds. 2 New Bond ETFs The new ETFs are the...
The Economist  1 hr ago  Comment 
AMERICA may be the world’s largest economy, but these days its government pays more than many others to borrow money. Its ten-year bond yields are higher than those in Britain, France, Singapore and even Italy. The gap between American and...
The Times of India  2 hrs ago  Comment 
UGANDA-TREASURIES/ (CORRECTED, TABLE):CORRECTED-TABLE-Yield on Uganda's 15-year bonds decline, two-year rate up
SeekingAlpha  2 hrs ago  Comment 
The Times of India  3 hrs ago  Comment 
USA-BONDS/:TREASURIES-Bonds steady before vote on U.S. healthcare law
MarketWatch  4 hrs ago  Comment 
Treasury yields were headed lower on Thursday for the fifth straight session after government data showed the number of Americans who applied for first-time jobless benefits last week was higher than expected.
The Times of India  4 hrs ago  Comment 
VOLKSWAGEN-BONDS/ (URGENT):Volkswagen wins over investors in bond market return
Reuters  4 hrs ago  Comment 
Euro zone stocks and bonds rallied on Thursday as banks snapped up almost quarter of a trillion euros of interest-free European Central Bank cash in what the ECB hopes will be the last outing for one of its main crisis-fighting tools.
BBC News  4 hrs ago  Comment 
Kenya is the first country to sell government bonds exclusively to citizens via their phones.
Yahoo  Mar 23  Comment 
Euro zone stocks and bonds rallied on Thursday as banks snapped up almost quarter of a trillion euros of interest-free European Central Bank cash in what the ECB hopes will be the last outing for one of its main crisis-fighting tools. Banks took a...




 
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.

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