by William Bond

Created on: October 04, 2008   Last Updated: October 11, 2008

A bond investor is someone who loans money to a corporation or government. Most bonds are safer than stocks and many investors try to include bonds as part of their full portfolio, sometimes people who plan to retire in a few years will increase their portfolio with bonds. Let's discuss the various bond options, so you can choose the best bond investment for you. Corporate bonds are issued by businesses to increase their cash to make equipment investments or handle their expenses, and will pay a certain interest rate, timelines vary from 2-l0 years. You must investigate the financial strenght of the company before investing, to guard your investment. United States Savings bonds are issued by the federal government and invests in U.S.treasuries, and has the safety of the U.S. Government behind the bonds. These can be purchased from banks or national mutual fund companies or from the government itself, at the Federal Reserve Bank. Premium bonds are usually issued by large commercial companies, and have a strong financial position, and their chances of paying your bond dividends are much better than investing in less stronger companies. Both the premium bonds and and commerical bonds might be taxable, and that means you must consider this when you purchase them. The municipal bonds are issued by governments and help them pay for parks, roads, highways bridges, cultural centers, citizen centers, schools and major building undertakings. The interest on these bonds are tax exempt, and make them very attractive to the investor. Summary. The loan the investor makes with the business or governement is for a set period of time, let's say it will be 7 years, and for a set interest rate, let's say it will be 4%, and pay paid to you yearly, or semiannually, based on the bond agreement, and you will get your at the maturity date, let's satm 7 years for now, the $l,000.00 you invested originally must be paid back to you, at par value, the $l,000.00 value to you the bondholder, also called lender. As a bond investor you play the part of a banker, you loan out money, for interest, and after a period of time, you get it back, in full at the end of the bond period, and also you have collected bond interest, also call bond income, during the full period of time of the investment. Now, remember when you invest in bonds, especially the corporate bonds, their is the possibility that the company you loaned your money, might fall into hard financial times and cannot pay you back, this can happen. Companies do go bankrupt, and this can effect your investment. So to avoid this, consider the U.S. Savings bonds, which have always paid their bonds holders over the years. Bonds can be a part of the full investment portfolio, but to be fully invested, and allocated, consider using the bond mutual funds because they have bond managers, which can research the best possible bonds for you, and get the best price, and the highest interest for you, and increase you chances to getting the maximum interest rates for your bonds.

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