Though bonds are one of the more common investment tools that are
traded on the securities market today, there are many people who aren't
sure exactly how it is that bonds work. If you've found yourself
wondering exactly how bonds are created, how you can buy them or make
money with them, and whether investing in bonds is right for you and
your financial needs, then this article is for you.
The information presented below will give you a better insight
into what bonds are and how you can work with them, so that you can
decide whether or not they are the right investment for you.
The Creation of Bonds
Unlike stocks, which are portions of company ownership that is
sold on the securities market, bonds are created by companies and
branches of government. Ownership of bonds is very much like owning a
certificate of deposit, which makes sense because bonds operate in a
very similar manner. When bonds are created and released for sale to the
public, a date of maturity is established… the bond will continue to
collect interest until that date of maturity, at which point the full
value of the bond will be payable to the bond owners.
Buying Bonds
Bonds can be purchased in much the same manner that shares of
stock or other securities are. Operating through an investment broker or
online brokerage company, an individual can purchase individual shares
of a specific bond at any point before that bond's maturity. Ideally,
you want to purchase shares of a bond early in the bond's lifespan… in
other words, you want to buy it soon after its creation so that you
won't have to pay as much for it and the final value of it will result
in higher profits for you.
Interest Rates
The rates that specific bonds pay can vary depending upon the
term of the bond, the company or government office that created the
bond, and the prevailing interest rates at the time that the bond was
created. Though many people look for bonds with high rates, it can also
be profitable to purchase a bond with a lower rate that has a longer
term than some of the high-rate ones.
Maturity
When bonds are created, the date that they reach maturity is set.
Often, this will be between six and twelve months, though the actual
time that it takes the bond to reach maturity depends upon the creator
of the bond. Before investing in bonds, it's important that you take the
time to research the bonds that you're considering so that you can find
the ones that have the longest amount of time remaining until their
maturity so that you can make the largest profit that you can from your
investment.
Keeping Bonds in Your Portfolio
Since bonds increase in value as time goes by, the longer you own
shares in a specific bond then the more profit you're likely to gain
from it. You should keep in mind, though, that the older a bond gets the
closer it's getting to its maturity, so it's important to keep an eye
out for new bonds to invest in so that your investment portfolio is
constantly growing.
Though it may seem like a lot of investments to keep track of at
first, you need to remember that as the bonds reach maturity they will
be paid out to you and will no longer be making a profit.
About the author
John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.
Tuesday, September 11, 2018
Thursday, August 16, 2018
Are U.S. Savings Bonds Still Relevant?
As a child, I remember getting my first savings bond. It was exciting! I was putting money away for my future, and getting a better rate of return on my money than the bank provided. Eventually, that little savings bond grew into a down payment for my first house. There are many reasons why your investment portfolio should hold onto some savings bonds, and its a shame that fewer and fewer people are taking advantage of this very useful investment vehicle.
Chances are, even if you have never received a savings bond in your name or had anything to do with them, you probably have some idea of what a U.S. savings bond is. If not, it's okay; they seem to be dwindling in popularity as of late, as fewer people are educated every day on the benefits of a U.S. Savings Bond. If you aren't really sure what a U.S. savings bond is and how they may or may not have a place in your life, read on for more information.
US Savings Bonds - What Are They?Savings bonds are a type of long term investment that used to be rather popular. There are a whole slue of different types of savings bonds out there, but this type of savings bonds are by far the most reliable, being backed by the United States government in quality and guarantee, and that is something that definitely plays on the positive side of the U.S. savings bond. In all actuality, a savings bond of this type is actually a loan to the U.S. government and the bond itself is a guarantee that the 'loan' will be paid back in full after a set period of time during which the bond will mature.
Where Can U.S. Savings Bonds Be Obtained? A great place to buy a savings bond is at your local bank. The most popular type of US Savings Bond are the Series EE which can be purchased at half the face value. So a $100 bond would cost $50. The minimum purchase is $25 while the maximum is $30 000 (although, you can purchase an additional $30 000 electronically). These types of bonds earn market based rates which change every 6 months. As such, there is no way to predict when it will reach its face value. These bonds much also be held for a minimum 12 months.
The other type of US Savings Bonds are the I Bonds which are an accrual type investment. Simply put, interest is added to the bond on a monthly basis. The rate of interest is determined each May and November and is based on the Consumer Price Index.
When Can I Cash in My US Savings Bond? Depending on the type of bond you purchased, the maturity date will differ. Knowing your savings bond before you buy is always a smart move. Since you purchase your I Bond at face value and receive interest annually, you can cash in any time after the 12 month period after you initially bought. However, its important to remember that if you cash in your I Bond within the first 5 years, there is a 3 month interest penalty. This is to encourage long term savings. As for the Series EE Bonds, if you hold til maturity, you do not get interest on your investment after that period. So remembering your maturity date is key. You can cash in your Series EE Bonds any time after the first 12 months after you bought them.
There is of course that little annoying thing called taxes! There are some tax advantages to owning US Savings Bonds, so it pays to ask your bank about them. If you are looking for a long term investment vehicle, that will help protect your hard earned money, then US Savings Bonds are for you. You don't have to own all savings bonds or all stocks. A mix depending on your age is always a good bet. Protecting your money is what its all about.
By: Christopher Smith
ABOUT THE AUTHOR
Visit us for more information on stock market investing, which is better: stocks vs bonds and Vanguard mutual funds overview.
http://www.1source4stocks.com/
Chances are, even if you have never received a savings bond in your name or had anything to do with them, you probably have some idea of what a U.S. savings bond is. If not, it's okay; they seem to be dwindling in popularity as of late, as fewer people are educated every day on the benefits of a U.S. Savings Bond. If you aren't really sure what a U.S. savings bond is and how they may or may not have a place in your life, read on for more information.
US Savings Bonds - What Are They?Savings bonds are a type of long term investment that used to be rather popular. There are a whole slue of different types of savings bonds out there, but this type of savings bonds are by far the most reliable, being backed by the United States government in quality and guarantee, and that is something that definitely plays on the positive side of the U.S. savings bond. In all actuality, a savings bond of this type is actually a loan to the U.S. government and the bond itself is a guarantee that the 'loan' will be paid back in full after a set period of time during which the bond will mature.
Where Can U.S. Savings Bonds Be Obtained? A great place to buy a savings bond is at your local bank. The most popular type of US Savings Bond are the Series EE which can be purchased at half the face value. So a $100 bond would cost $50. The minimum purchase is $25 while the maximum is $30 000 (although, you can purchase an additional $30 000 electronically). These types of bonds earn market based rates which change every 6 months. As such, there is no way to predict when it will reach its face value. These bonds much also be held for a minimum 12 months.
The other type of US Savings Bonds are the I Bonds which are an accrual type investment. Simply put, interest is added to the bond on a monthly basis. The rate of interest is determined each May and November and is based on the Consumer Price Index.
When Can I Cash in My US Savings Bond? Depending on the type of bond you purchased, the maturity date will differ. Knowing your savings bond before you buy is always a smart move. Since you purchase your I Bond at face value and receive interest annually, you can cash in any time after the 12 month period after you initially bought. However, its important to remember that if you cash in your I Bond within the first 5 years, there is a 3 month interest penalty. This is to encourage long term savings. As for the Series EE Bonds, if you hold til maturity, you do not get interest on your investment after that period. So remembering your maturity date is key. You can cash in your Series EE Bonds any time after the first 12 months after you bought them.
There is of course that little annoying thing called taxes! There are some tax advantages to owning US Savings Bonds, so it pays to ask your bank about them. If you are looking for a long term investment vehicle, that will help protect your hard earned money, then US Savings Bonds are for you. You don't have to own all savings bonds or all stocks. A mix depending on your age is always a good bet. Protecting your money is what its all about.
By: Christopher Smith
ABOUT THE AUTHOR
Visit us for more information on stock market investing, which is better: stocks vs bonds and Vanguard mutual funds overview.
http://www.1source4stocks.com/
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