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Benzinga  37 min ago  Comment 
Why would anyone buy a 30-year U.S. bond, especially at a time when the "Trump rally" is showing little signs of cooling off? While there are many logical and rational reasons for owning a different asset class than equities, the "Oracle of...
MarketWatch  2 hrs ago  Comment 
Treasury yields ticked higher on Monday as investors were reluctant to open large positions ahead of President Donald Trump’s first congressional address, market strategists said.
SeekingAlpha  3 hrs ago  Comment 
The Hindu Business Line  6 hrs ago  Comment 
French 10-year bond yields hit a one-month low on Monday, pushing other euro zone sovereign yields lower, while a more cautious mood hung over world stock markets and the dollar, both of which strugg...
The Economic Times  6 hrs ago  Comment 
The scheme is aimed at unlocking 20,000 tonnes of the precious metal lying idle in households and temples, whose worth is estimated at around $800 billion.
Yahoo  Feb 27  Comment 
French 10-year bond yields hit a one-month low on Monday, pushing other euro zone sovereign yields lower, while a more cautious mood hung over world stock markets and the dollar, both of which struggled for clear direction. The fall in French bond...
The Hindu Business Line  Feb 26  Comment 
The Government will issue applications for the fourth tranche of the Sovereign Gold Bond scheme from February 27 to March 3. The bonds will be issued on March 17. The bonds will be sold through banks...




 
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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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