Bond Market

Every person who is considering investing should know the important keys about bonds. Bonds are another way of investing that are a bit safer that may help keep your portfolio above water in bad economies.A bond is an IOU by a corp. government, or governmental agency to cover money the bondholder has lent. As a bondholder, you are a creditor.

Although boring compared to stocks, bonds play a crucial role in the economy and is a must-have for most investors. Bond investment returns are usually smaller however, they’re a much safer investment. A bond acts as a counterbalance to the volatile and less reliable stock market.

As an investor you should have both bonds and stocks in your portfolio. If you can handle being a little risky and can stand to lose a little cash at the risk of possible greater wealth, then more stocks are for you. If you want to play it safe you will concentrate heavier on bonds.

Corporations issue bonds so that they can borrow a huge or often times large amount of money for whatever reason. Companies have two basic ways to raise money for a variety of reasons that they may need it. They can issue stock or borrow the money. Corp bonds come in $1,000 denominations and have maturities up to 40 years, but are usually shorter.Governments and governmental agencies also use bonds to raise money. U.S. Treasury Bonds are touted as most secure investments in the world because the U.S. Government backs them with its creed and promise of “full faith and credit”.

U.S. Treasury issues come in several maturities and denominations. Other U.S. agencies issue bonds to fund such things as mortgages and other government programs.

There are four types of bonds: Par value, also known a face or principal value, is how much the bondholder will receive at maturity. A $1,000 par value bond will be worth $1,000 when it matures. Maturity refers to the length of time before the par value is returned to the bondholder. It may be as short as a month or even up to 30 years. At maturity, the bondholder receives the par value of the bond. Coupon is the interest rate the bond pays. This interest rate does not vary over the life of the bond, although there are some bonds, which have a variable interest rate tied to an external index.

The bond market is safe, reliable, and easy to invest in. There are some very secure bonds to buy such as U.S. Treasury issued bonds. I would also fetch and say that an English bond or a French bond would hold a high reliability and stability value. So investing in bonds is secure and important in any investor's portfolio. This will be great to add and is recommended with the down economy and the amazing amount of profit that you truly can be. Even if the return is less, you can still make money.