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Bonds

August 6, 2009
Buying bonds is one of the best ways of investments. If you buy a bond you get an interest of about 5% to 7%. Bonds are safer investments.
You can invest in bonds by lending money to other people. The person to whom you lend the money gives you the bond which contains the details such as the amount of money being borrowed, interest rate and the maturity period.
Risks in Bonds:
One of the risks of investing in bonds is a default, which occurs when the issuer of the bond fails to make payments. If the issuer of the bond declares bankruptcy then you loose your money.
Types of Bonds:
Treasury Bonds (T- bonds):
The interest rate is much lower and is more safer than the other types
Municipal Bonds (munis):
Muni bonds are bonds sold by municipalities to raise money to build public facilities such as schools, roads, water supplies, and stadiums.
The advantages in buying munis are that the interest payments are free from federal and state income taxes.
Corporate Bonds:
Corporate bonds are bonds that are issued by corporations such as Disney, IBM, and General Electric. These bonds work the same as munis except that their interest payments are taxable. Corporate bonds also receive bond ratings from S & P and Moody¬タルs
In general the lower the interest rate, more safer is your money.
Advantages:
1) Bonds give higher interest rates compared to short term investments.
2) Bocks are less risky compare to stocks
Disadvantages:
1) Bonds are long term investments and in case if you sell bonds to some other before the maturity it leads to a loss.
2) If the issuer of the bond declares bankruptcy then you loose your money.
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