RECENT NEWS
Reuters  3 hrs ago  Comment 
A group representing holders of Oi SA's bonds not guaranteed by unit Telemar Norte Leste SA is growing, two sources familiar with the matter said, underscoring the challenges...
MarketWatch  4 hrs ago  Comment 
Regardless of which side wins at the so-called Brexit referendum on U.K.’s EU membership, the sovereign bond market—an asset class that is traditionally considered among the safest—could suffer casualties.
Benzinga  5 hrs ago  Comment 
Amid rebounding commodities prices and still low U.S. interest rates, high-yield corporate bond exchange-traded funds are rebounding this year. So are emerging markets bond ETFs. Combing those two asset classes could prove potent. Combining...
Wall Street Journal  8 hrs ago  Comment 
Stocks suggest an upswing in inflation is coming, while bonds’ forecast is for prices to stay cold. The stock market’s message may be right this time.
MarketWatch  10 hrs ago  Comment 
Government bond prices fell and yields rose Thursday as British citizens headed to the polls to decide on whether to leave the European Union bloc
SeekingAlpha  11 hrs ago  Comment 
Financial Times  Jun 23  Comment 
M&A deal volumes have fallen by more than a fifth so far this year compared with 2015
The Economist  Jun 23  Comment 
THEY are the aristocrats of the corporate sector. Some companies are so favoured by investors that their bonds trade with negative yields: investors are buying their debt at a price that exceeds the value of the interest payments and principal....
Mondo Visione  Jun 23  Comment 
Today, Tokyo Stock Exchange approved a JPY-denominated bond with a total value of JPY 15 billion (tenor: 3 years, coupon: 0.32%) from Industrial and Commercial Bank of China Limited for listing on the professional-oriented TOKYO PRO-BOND...
TheStreet.com  Jun 22  Comment 
Fixed income investors are gearing up for more carnage should UK citizens vote to leave the European Union on Thursday. Yields on the 10-Year Treasury stand at 1.69%, compared to 1.85% one month ago. Germany's 10-Year Bund yield stands at 0.061%,...




 
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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