Investing in Bonds

Bonds are a great way to invest your money and make a small profit. These bonds are basically companies and the government asking the public for a loan. In return for these loans they give a small return usually somewhere around 5% over a certain period of time. Some bonds can be 1 year long while others can last up to five or more years. These bonds as stated before can be purchased through the government who usually give the least return, as well as companies. Usually a general rule of thumb is that the larger the company, or the more financially stable the company the lower the rate of return will be. The smaller or less secure companies will need to give a larger return because they are more risky. This ties into the general rule of investments which is the larger the risk the larger the return. So now that we have discovered what bonds are I would like to talk about where you can buy these bonds. Generally these bonds are traded on their own market, similar to the stock markets, Bond markets list many different bonds at certain rates and different dollar values. Bonds can also be bought directly through the government when they are offered. A great example of this would be Canadian Savings Bonds which I believe are currently available. Also throughout the duration of the bond the owner is paid what is called coupons, this is a annual or bi-annual payments that are given to the bond holder as payment for buying the bond. These coupons are the only money that you receive until the end of the bond which is when you are reimbursed the amount of your original capital. Another interesting thing about bonds is that you can actually trade these bonds once you own them. This allows investors to regain their investment and then some if they would like to make a profit without waiting the entire term of the bond or if they just need the money. The unfortunate thing about bonds is that they do have risk, if the company that you purchase a bond from goes under you can lose your investment. This once again refers to the golden rule the larger the risk the larger the return. Another downfall of bonds is that the money that is invested is locked in for the duration of the bond unless it is sold or traded.

Bonds are a great way to invest and save money if you are able to invest large amounts of money, and are also able to live without that money for a long period of time. Bonds are one of the more secure ways to invest and are good for people who do not want to take on too much risk.