Bonds Are One Of The Safer Stock Market Investments
If you are a cautious investor, you might opt to buy bonds as they have good profit potential and are a remarkably safe investment
. It is advisable to find out about all the different options for buying bonds that you have if you want to start in the bond market.
Firstly you can invest in four basic kinds of bonds:-
Ones that the national government sell
Corporations offer some
Local and state governments
Overseas governments
Unlike with ordinary stock exchange trading you can never lose the amount of money that you put in up front although you could lose out to inflation. This is why they are so safe for any of you who like to trade at low risk or anyone just starting out in online stock market trading.
Here are the 4 main types:-
The U.S. Treasury department offer treasury bonds for our government. They can have any term put on them from short term 3 months to long term 30 years. Examples of these include T-Bills (Treasury Bills) and T-Notes (Treasury Notes). The backing these bonds get from the United States Government through the central banks makes them the safest investment of them all but they do usually have low interest rates. Moreover you will only have to pay tax on the amount of interest that they give you.
The public securities market sell corporate bonds. In essence a corporate bond is no more than a corporation getting rid of its debt. For this reason, they are for the medium risk investor but do normally offer higher yields for you. Of course, if the business fails, you will not get any returns.
Bonds from state and local government. These are very similar in their performance to the corporate bonds. They are more risky than government bonds as there are more challenges at the local level rather than the nation level. The big advantage with them though is that you do not have to pay any taxes on them whatsoever. Not even for the interest portion. There may be small state tax to pay sometimes though. The Municipal Bonds are a good example of this style of investing.
Foreign bonds are more difficult to get hold of. You often have to get them as a part of a mutual fund. Only consider these if you are a high risk investor. We have less control over the finances of other countries.
When your bond gets to its maturity date you have the option to start a new bond with the proceeds.
So, to summarise, the safest ones are the US Government long term treasury bonds and that is the place to start when you first buy a few bonds.
Bonds Are One Of The Safer Stock Market Investments