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A Complete Beginners Guide To Bond Investing

By: Bill Dufrane

Unlike the volatile stock market, bonds are quite stable over long periods (most of the time). They have more predictable characteristics owing to their fixed interest rates. This guide will make some sense of bonds for those looking to get into investing.

1. Bonds Are Expensive

Unlike stocks, bonds are traditionally much more expensive, and are given out in $1000 increments and a minimum investment of $5000. Of course, the benefit of dishing out this kind of money is that with other investors bond funds can be pooled and diversified, maximizing return while minimizing risk.

2. Have An Expert Do It For You

Since the fund is managed by investment professionals, so the theory goes, it has a better chance of achieving its goals than the sucess you might have trying to invest on your own. You have limited time and training needed to make those kinds of decisions. For that service, of course, the investor pays a fee.

3. Bonds Are Very Safe

OK, thats somewhat of a lie. Bonds arent entirely safe, but highly rated corporates (AA or above) or U.S. Treasuries are as good as it gets. Unlike the stock market, bonds are very low-risk investments. As such, they also have a very low return on your investment.

4. Buyer Beware

When choosing a representative for your bond, be sure they are reputable. Some traders charge trading fees, as much as $10 per trade, and this can add up to a huge trading fee by the end of the year. One scam some traders do is invest your money in lower amounts, in some cases charging the $10 for a trade that wouldn’t make $10.01 in profit.

5. Bonds And Maturity

Bonds and stocks are both securities, but the difference is that stock holders own a part of the issuing company (have an equity stake), whereas bond holders are in essence lenders to the issuer. Also bonds usually have a defined term, or maturity, after which the bond is redeemed whereas stocks may be outstanding indefinitely. An exception is a consol bond, which is a perpetuity, a bond with no maturity.

Article Source: http://www.noviceinvesting.com/Article

For more great bond investing related articles and resources check out www.investingadvisor.info

Trading

Stocks Decline in Late Afternoon Trading (ABC News)
Dow, Nasdaq Slide in Late Afternoon Trading on Weakness in Regional Manufacturing

The Risks And Benefits Of Corporate Bonds

By: Bill Dufrane

Rarely will you find an investment where you gain a substantial reward without an equally substantial amount of risk. Let’s face it - the odds are stacked against you. Not only are there other huge banks and multinational corporations you have to compete against that have more capital than you will ever have, but there are millions of other investors trying to test their luck in the same market. Your choice of where to invest your money is therefore highly important. This is where corporate bonds come into play.

1. Corporate Bonds

Many times, corporations have great sales and service records but just don’t have the funds needed for a particular initiative. A corporate bond is high yield as essentially you are lending the company your money.

2. Credit Risk

Of course, you have to consider that many companies seek bonds because they are in financial trouble and need a quick cash injection to keep themselves afloat. It will be up to you to differentiate that companies are looking for a handout and that legitimately have a quality operation and simply need funds to expand and grow their business.

3. Corporate Bond Ratings

Credit risk on bonds is actually rated in an easily understandable fashion. Triple A bonds are very low risk, and similarly low yield. BB is considered junk - very risky but potentially insane payouts, all the way to D (avoid these at all costs).

4. Interest Rates

If you are going to be acquiring a bond, of the things you should look for, the interest rate is high on the priority list. Getting a bond with even a 1% better rate of interest can result in hundreds of additional dollars in your pocket each year. Since general interest rates can change, a bond purchased today offering 5% is worth less if interest rates in general rise to 8% a year later.

5. Life To Maturity

Many corporate bonds come with the option to be callable. This means that they can be redeemed prior to the date of maturity. Companies do this when interest rates fall, and they wish not to continue making high interest payments to bondholders. In essence, this is a form of corporate re-financing similar to that done by homeowners with their home equity. That callable feature represents the risk to an investor that, though initially receiving high interest payments, they may not be able to enjoy that same rate for the life of the bond. As a consequence, those bonds are often less expensive and have lower interest rates.

Article Source: http://www.noviceinvesting.com/Article

For more great corporate bond related articles and resources check out bondsadvisor.info

Trading

Friedman, Billings, Ramsey settles trading charges (Market Watch)
WASHINGTON (MarketWatch) — Broker-dealer Friedman, Billings, Ramsey settled charges that it engaged in insider-trading and other activities while working on behalf of CompuDyne Corp., securities regulators said Wednesday.

Kimberly-Clark Options Trading Surges on Buyout Talk (Update3) (Bloomberg.com)
Dec. 21 (Bloomberg) — Trading in options to buy shares of Kimberly-Clark Corp., the maker of Huggies diapers and Kleenex tissue, rose 24-fold, the most in more than six years, on speculation the company may be bought.

Bonds - Are They Right For Your Portfolio?

By: Bill Dufrane

For those wishing to invest their money - usually those wishing to put away a tidy nest egg for retirement or their children for school - there are a lot of decisions to make. You can’t jump into just any arrangement, and especially not the first offer that comes your way. Perhaps the most pertinent question you might ask yourself when investing is, what should oneu invest in - in other words, what’s good to invest in right now?

1. Put Your Money First

The final aspect of investing in bonds shouldn’t be the qustion as to what you should buy or sell, but rather, how much capital you are going to gain in the form of dividends. Remember, you aren’t buying stocks, you are investing. This means you expect a return on your investment.

2. Stocks

If you plan on investing in stocks, a general rule is to hold them for at least 10 years. Stocks will, over this period of time, outperform any other possible investment. Don’t even think about real estate, bonds, or commodities, stocks are definately the way to go, and it is not uncommon to see returns of up to or over 10%.

Of course, that is not to say that stocks are always the safest choice. Few investors actually buy stock and hold it for ten or more years. Also, with the exception of mutual funds individuals tend not to invest in stocks in general, but rather in a particular company. Also, even then, times change because new and better technologies come to pass. General Electric no longer makes most of its revenue from light bulbs, for example.

2. Bonds

If youre going to go with a bond, first of all, expect to pay a minimum of $5,000. You will definately want to invest in a bond that is rated AA or higher, and stick to a well known, major brokerage to handle your investment. Even with inflation you can expect to make only 4% profit per year. Of course, 4% of $5,000 is only $200, but over a period of 10 years that turns into $2,000. Of course, in today’s economy $2,000 won’t even last a month for rent, food, utilties, etc. Even so, bonds have advantages no other instrument enjoys. Since they have a set interest rate and maturity date, their behavior is much more readily predictable, given plausible assumptions about interest rate changes and other economic factors. You can’t attribute this kind of reliability to stocks, for example.

3. Currencies Or Commodities

The beginning investor should never engage in trading commodities or currencies, such as FOREX. Don’t believe the hype surrounding these investments - there is a reason why so much money is floating around out there - people are losing it!

4. Real Estate

If you think that the value of real estate is always on the rise, think again. Although a great way to make substantial gains, if you are going to make any real money you have to be able to invest a lot of your capital - more than any other variety of investing. Many simply can’t do it part time and try to make it their full time job. Some succeed, many fail.

5. Funds

If you are looking to make some quick cash, funds offer a great alternative to direct investing. Mutual funds, one of the more common types, pool investor money and diversify investment (usually) into a variety of instruments - stocks, bonds, currency, commodities, etc. Investors save money by not incurring a fee for every trade, but pay management fees of one kind or another (usually annual), and those can eat substantially into overall return on your investment.

Article Source: http://www.noviceinvesting.com/Article

For more great bond related articles and resources check out www.bondshq.info

Trading

Asian Stocks Fall in U.S. Trading, Led by BHP, Commodity Shares (Bloomberg.com)
Dec. 21 (Bloomberg) — Asian stocks fell in U.S. trading as reports showed U.S. economic growth slowed and manufacturing in the Philadelphia region contracted by the most in more than three years. BHP Billiton and other commodity shares led the decline.

Should You Choose Stocks Or Bonds?

By: Bill Dufrane

The difference between stocks and bonds isn’t clear to those just starting in the wonderful world of investing. While stocks give investors part ownership of a company, bonds are loans made by investors to corporations or governments. Rather than benefiting from company profits the way that stock holders do, bond holders receive a fixed rate of return a fixed interest rate. Bonds only last for so long and have a termination date called the date of maturity. Also, they can take decades to mature, whereas stock exchanges happen with lightning speed every day. If you are just looking to make a quick buck with high risk, go for stocks. In comparison, if you need stability, say, for a retirement, you might choose bonds.

1. Risks Versus Rewards

As hinted at earlier, stocks have a higher rate of risk whereas bonds are more secure. Of course to say bonds are safer than stocks doesn’t automatically mean that you will always make money on bonds. A bond is an investment - and as such it may not be paid back. US government bonds are considered to be the safest type of bonds. Blue chip corporations (those with established performance records that span over many decades) are also very safe bond investments. Smaller corporations have a greater risk of defaulting on their bonds, but if the business goes bankrupt bond-holders are preferential creditors and will get compensated first.

2. Trading Bonds

Traditionally, bonds were the exclusive trading realm of huge corporations and banks. Not any more - even a savvy investor can begin trading bonds with as little as $5,000. Bonds bought and sold after the initial issues are quoted in increments of $100. A bond that is listed at 96 is selling for $96 per $100 face value.

3. Stocks Or Bonds?

Given what you have read so far, you might think that stocks are better for the short term and bonds for the long term, but the statistics do not lie. Bonds offer greater security and return on your investment than stocks, overall. The situation changes, however, when time spans of longer than 10 years are considered. The stock market has consistently outperformed bond investments by a large factor. This is because companies continue to increase in value and any short term fluctuations in the stock market become smoothed out. Overall, you should never put all your eggs in one basket - consider a bond as part of your portfolio to help cushion against market fluctuations. A mixture of investments is always the best choice.

Article Source: http://www.noviceinvesting.com/Article

For more great stocks related articles and resources check out stockhub.info

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