Superior Gold Group - Types of Bonds

Superior Gold Group - Types of Bonds

Superior Gold Group - Types of Bonds

Now, they're not the plural form of the infamous 007. Bonds are one of the more common types of investments, in which is often regarded as the less risky of all. They are also the most predictable, both in value and income. Even if most of us know what bonds are, we exactly still do not know the different kinds of bonds and how they work. This article will help you get to know the types of bonds, and help you decide what is the best one for you.

US Treasury Issues These are probably one of the more common types of bonds and investments out there. This is due to the fact that this type of bond is represented by the U.S government itself, assuring you that returns are guaranteed. However, the problem with this is the fact that due to it being run and owned by the U.S government, the returns are quite low. Sometimes the return is not even enough to keep up with rising levels of inflation. Also, one thing that makes this attractive is the fact that these are free of local and state taxes. The only taxes you'll have to pay are federal taxes.

Agency Bonds These bonds, although issued by U.S government organizations, are not guaranteed by them. With these bonds, there are generally high levels of risk. However, coming with that are potentially higher returns as compared to ones gained through US Treasury Issues. These types of bonds are commonly purchased in large denominations.

Here are the different types of Agency Bonds offered:

Government National Mortgage Association or Ginnie Mae

Federal National Mortgage Association or Fannie Mae

Federal Home Mortgage Corporation or Freddie Mac

Student Loan Marketing Association or Sallie Mae

Corporate Bonds These types of bonds are offered by corporations whom want to expand or are looking for ways to further finance their future projects. These types of bonds are usually risky, due to the fact that it is dependent on the corporation. However, it is also compensated by higher potential returns. Add the fact that some corporations may issue bonds that are convertible, which means your bond may very well be converted to a stock. They may also offer callable bonds, which can be redeemed anytime before they reach maturity.

Municipal Bonds These are pretty much like government bonds. The only difference is that it is issued by a state, a country, a city, a town or etc. They usually do this to get more funds for their projects. These types of bonds are free from federal taxes and are often more secure as compared to the others. For those who want a safe way of getting potential returns, Municipal bonds are best.

Zero Coupon Bond They are usually purchased on a very deep discount, or for those who are slow, they are relatively cheap. However, they do not pay interest on a regular basis. You gain money once the interest accumulates and once the zero matures.

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