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SeekingAlpha  10 min ago  Comment 
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Clusterstock  32 min ago  Comment 
The Bank of Japan is ostensibly prohibited from underwriting Japanese Government Bonds (JGBs), which is why many investors might be surprised to learn that the BOJ actually can and has been doing so. Article 5 of the Public Finance Act...
Benzinga  3 hrs ago  Comment 
Going Long on a security means an investor has purchased the respective commodity, stock, or bond with the intent of the security increasing in value in the future. Often times going long on a security or having a long position means the investor...
Motley Fool  5 hrs ago  Comment 
Rates could go as low as -0.5% before investors start hoarding cash in vaults around the world.
Benzinga  5 hrs ago  Comment 
Yields on 10-Year U.S. Treasury bonds are sitting near all-time lows, yet Leuthold Weeden Capital Management’s Doug Ramsey doesn’t see many sellers stepping up to the plate publicly. According to Ramsey, bond traders likely have the memory of...
MarketWatch  9 hrs ago  Comment 
Treasurys rose modestly Tuesday, nudging yields marginally lower, after a relatively upbeat report on the U.S. housing market and weak data out of Germany
Clusterstock  12 hrs ago  Comment 
Investors are bucking common wisdom in the face of an unprecedented divide in markets. Bond yields have collapsed to record levels while stocks hit all-time highs, and that has created a "great divide" in the market, according to Binky Chadha of...
Forbes  12 hrs ago  Comment 
On Tuesday morning, Goldman Sachs posted better than expected second quarter earnings, bolstered by the bank's effectiveness in shrinking its bottom line
The Economic Times  Jul 19  Comment 
Prominent mutual fund houses including UTI MF and DSP Blackrock MF have invested in these securities, people familiar with the matter said.
Financial Times  Jul 19  Comment 
Government bond yields nudge lower




 
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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