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Yahoo  7 hrs ago  Comment 
Argentina's central bank on Monday won the reversal of a U.S. court ruling that had allowed bondholders to try to hold it responsible for the country's obligations on debt that has been in default since 2002. The 2nd U.S. Circuit Court of Appeals...
MarketWatch  8 hrs ago  Comment 
Treasury yields edged lower Monday as traders bought bonds after last week’s selloff, and supply pressures created by an influx of new bonds faded.
Mondo Visione  Aug 31  Comment 
Singapore Exchange (SGX) today welcomed the listing of Aspial Treasury Pte Ltd.’s five-year retail bonds with a coupon rate of 5.25% per annum, payable half-yearly, on the Mainboard under the stock code, “BEYZ”. Aspial Treasury provides...
The Economic Times  Aug 31  Comment 
The continued turmoil in Chinese equities is lifting interest in exchange-traded bonds, broadening the domestic fixed-income market as investors look for alternatives to volatile A-shares.
The Hindu Business Line  Aug 30  Comment 
A massive outflow of funds can lead to losses in bonds. But sit tight and look forward to gains in the long term
newratings.com  Aug 28  Comment 
WASHINGTON (dpa-AFX) - After failing to sustain an early upward move, treasuries turned lower over the course of the trading session on Friday. Bond prices slid into negative territory in morning trading and moved roughly sideways thereafter. As...
Financial Times  Aug 28  Comment 
Conventional wisdom says higher US bond yields hurt EMs, but the truth is often the opposite
Clusterstock  Aug 28  Comment 
By Sujata Rao This month's wild ride in global stocks and fears of an emerging market crisis led funds to raise bond allocations to eight-month highs, even though most investors remain bullish on the outlook for Japan and the West. The monthly...




 
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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