Below are some basic but important information on Bonds, in case you may be interested in them and how you can financially improve by investing in them.
If you missed my blog post on Stocks you can check that out here: WHAT ARE STOCKS?
Also, check out other posts from this Series Here: FINANCIAL GROWTH SERIES
WHAT ARE BONDS?
In finance, a bond is an instrument of indebtedness of the bond issuer to the holders. The most common types of bonds include municipal bonds and corporate bonds. Bonds are long-term lending agreements between a borrower and a lender. It describes the key terms of the bond issuance, such as maturity date and interest rate. The people who purchase a bond receive interest payments during the bond’s term (or for as long as they hold the bond) at the bond’s stated interest rate.
HOW DO BONDS WORK?
Bonds are issued by governments and corporations when they want to raise money. By buying a bond, you’re giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date, and to pay you periodic interest opens a layer closed payments along the way, usually twice a year. Bonds pay interest regularly, so they can help generate a steady, predictable stream of income from your savings. Security. Next to cash, U.S. Treasurys are the safest, most liquid investments on the planet. Short-term bonds can be a good place to park an emergency fund or money you’ll need relatively soon.
ARE BONDS SAFER THEN STOCKS?
Many investors are under the impression that bonds are automatically safer than stocks. After all, bonds pay investors a regular fixed income, and their prices are much less volatile than those of stocks. Conversely, a stock is low-risk for the issuing company, but it’s high-risk for investors.
HOW CAN YOU MAKE MONEY WITH BONDS
There are two ways to make money by investing in bonds. The first is to hold those bonds until their maturity date and collect interest payments on them. Bond interest is usually paid twice a year. The second way to profit from bonds is to sell them at a price that’s higher than what you pay initially.