Bonuses are one of the most important and most fashionable forms of all securities. Investors are supplying bonuses and bond funds for their income and low risk that can balance purchases of higher stocks that are productive, but the risk is higher. If you are a beginner investor, you should know the characteristics of the bonds and how this portfolio tool can diversify and strengthen your portfolio.
A bond is a debt instrument issued by a corporation or government to borrow money. Corporations are issuing bonds as an alternative to the sale of shares (shares) to get the capital. Governments use bonds to fund capital expenditures, such as schools, water systems and sewerage, or to cover the above costs. They have an expiration date of up to 30 years (and sometimes even longer). In the bond period, the issuer gives the bond in its nominal value.
Corporations and municipal bonds (state or local government issued) generally have a uniformity of US $ 1,000 or US $ 5,000. US Treasury bonds may have equivalent amounts of US $ 10,000 or more. The other two types of bonds are worth mentioning. One of these is the “zero coupon” bonus. A zero coupon voucher is sold at a large discount on the face value and does not pay interest. Conversely, when in bond time, an investor accepts the nominal amount of the bond. Another is the popular bond savings of the US. Like zero coupon bonds, it is sold at a discount. Interest increases until the bond reaches its nominal value in maturity. Saving bonds are negotiable (they can not be bought and sold as other types of bonds).
Regular bonuses will pay a fixed annual amount (usually twice a year) called a coupon rate. Bonds are traded as long as the shares, so the price varies. The most important influence on the price of a bond is the current interest rate. If interest rates fall, the rate of fixed coupon of bond becomes more attractive to investors and the bond price may rise above the nominal value (this is known as a sale of a scarce goods). If interest rates rise, the opposite is likely to happen. The coupon rate is preferable and the price of the bonds has fallen (if the price falls below the nominal value, it is sold at a discount).
Investors are talking about the performance of a bond, rather than an interest rate. The yield is the effective interest rate, and is calculated by dividing the coupon rate by the price paid for the bond, not the face value. The lower the price, the higher the yield. You can use the software for calculating bonus performance online at financial websites like Morningstar.com. Generally, the yield on municipal bonds is lower, as coupon rate payments are generally excluded from taxes. The fee for lower performance, especially if you are in a high tax category.
Although short and long-term bonds share the same basic structure (except for zero-coupon bonds), short-term bonds (with maturity less than a year and often less than 90 days) vary. . Due to their short duration, they rarely change substantially in price, and are paid at maturity for the full nominal value in any case. These are the types of bonds purchased and sold by currency funds in the marketplace and are used by companies and governments to raise money for immediate needs.
Because bonds are due on the face value of the period, they usually carry less risk than stocks, but they also offer no opportunity for capital growth. Bonds are an investment option for people seeking security and income growth in their own resources (as an integral part of a portfolio after retirement, for example). However, bonds are not completely risk-free. The best bonuses are those with the best rating bonus bonus services like Moody (moodys.com). If a bond has a low rating or lowering its rating, this means that the issuer is unlikely to pay it higher. Two other factors should be taken into account. One of these is if you buy bonus bonuses and keep them up to expiration; You will receive only a nominal amount of the bond, which results in the loss of capital. Another is that some bonds have provisions that allow the payer to pay an early bond, which can work on your loss if you bought it a premium.