Bonds – What Are Bonds?
Business owners that lack the capital for expansion often turn to the bonds market for additional funds. Not limited to just companies and organizations, governments are one of the largest bond issuers in the world. Investors, private individuals, banks, insurance companies and pension funds are all able to purchase bonds.
Coupons are the means that control how much the investor gets paid. On the whole spanning months to years, the coupon sets the interest rate paid to the lender across the time span stated. Bonds are also well-known as fixed income securities mainly because the interest rate offered is fixed and identified to interested parties when the bond is up for sale.
So why are bonds so tempting to some?. There are some advantages that bonds have over other investments such as the stock market. When you buy a bond you are investing in debt rather than equity (stocks). Should tragedy ever befall the bond issuer, say a bankruptcy, creditors (debt-holders) get paid before shareholders do.
The bond market is frequently a lot more consistent than other markets are. That doesn’t mean there are no risks in the bonds market. The risks are present. Bonds are regularly marked by their careful temperament. They pay-off is regularly a lot less than other more exciting investments but that is the trade-off for a good measure of security. As such, bonds are often an unnoticed investment as the largest part people opt for higher risk investments such as forex trading, stocks and commodities.
While Japan issues the second chief amount of bonds in the world, United States issues the a good number. The bonds market saw some 80 trillion dollars in purchases for the year 2008.
Dabbling in the bonds market does have its downside. Only those that invest substantial amounts see big profits. There may not always be a buyer when you sell the bond. Unlike the currency market, where 90% of orders can be sold in a second. Lastly, bonds cannot be traded on the market like stocks or currencies are.
Taken as a whole, bonds offer a genuine investment opportunity to the Malaysian public and should be part of your investment portfolio. For those of you in Malaysia that are looking to invest your hard earn money but are disinclined to undertake the high risks of the majority forms of investment, the bond market is great for you. The profits nonetheless, are in no way great unless a sizable amount is purchased.
A summary on Bonds and Forex in the links mentioned. The Author has been investing online for over 7 years. When Prema De Silva is not trading stocks, she expands her knowledge on online investing and oversees the operation of a popular mutual Funds trading website.
