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Sadie | Are bonds a good and safe investment? |
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muncie birder
 |
Well. I am not particually fond of the previous answers because they fail to mention what inflation can do to bonds. For example: If you own a bond that pays 4% interest such as a long term munciple bond and the rate of inflation rises to 7%--remember Jimmy Carter?--You bond will loose about 50% of its value.
Now the US government will sell you a bond that pays inflation + 1%. They are called TIPS. Of course the government makes you pay taxes on ALL the interest, not just the 1%.
The other option that protects you from inflation is T-bills. Currently 6 mo T-bills pay about 4.7% which is more than 10 and 30 year bonds. |
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trade_info
 |
There are several types of bonds, some are safe, some are good and some are good and safe.
1. Corporate bonds come in several flavors. High Grade to Junk. You get better yields with Junk, you just have to know what you are doing and be very diversified. Also buying and selling at the right economic times is critical.
2. Municipal bonds also cover lots of types. General obligation bonds are safest, tax free generally and can be a great deal if you are in a high tax bracket. Insurance is provided on many issues. Again a diversified approach is best, but defaults of GO bonds are rare.
3. Government (fed) bonds are considered the safest investment going. I Bonds are a good deal for conservative investor looking for inflation protection.
check out treasurydirect.com
you can also buy no load mutual bond funds, vanguard.com
Bonds can be a great way to invest, ignore answers from those who are clueless. |
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Steve
|
They can be. If the real question is, are they safe for you? That cannot be answered here. There are many different types of bonds and many different levels of risks with bonds. There are also many different strategies for investing in bonds. It all depends on where you are in life and what you are trying to accomplish.
Check out this site, http://www.investinginbonds.com/
On the right hand side, click on learn more and then go down the list. There is a lot of great information here.
I would recommend sitting down with an experienced financial advisor to discuss your specific information.
Good luck!! |
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ykchen913
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In general, they are. That's why most financial advice on portfolio diversification will increase the portion on bonds/CDs as you become more conservative. |
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kiezkahse
 |
Generally, bonds are "decent". The conventional wisdom I can pass on to you is that: Bank account is safest but worthless because it returns less money than inflation will soak up, Money Market funds should be almost as safe and worth a bit more, Bonds are less safe but should be worth noticibly more, and Stocks are wild and crazy with (hopefully) returns to match. Note that this doesn't substitute for actual research; Morningstar is a wonderful site for digging into precise details of how particular financial investments are expected to behave. |
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Proud Mommy
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yes they are very safe. my sister works for the bank and says people always want bonds. |
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sinclairag
|
The safest investment is short term money market instruments. Bonds with maturities farther out in the future carry more risk.
Corporate and government agencies have different debt ratings. Government bonds aren't necessarily risk free. Check bond ratings with Moody's or Standard and Poors.
Bonds with longer term maturities can decline quite substantially in the bond market before they come due. Rising interest rates send bond prices lower. It is important to understand you may have to take losses if you need to sell bonds before they mature.
Bonds can be an important part of a financial plan. They are not without risk. |
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theothermikes
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It depends on the company. A bond is essentially an agreement to repay a loan. The company borrows money on the bond market, and agrees to pay it back over a specific time at a specific rate. If the company is financially sound, yes, they can be very good and safe investments. If the company is not so sound, you could lose the money you've invested/lent to the company. Some companies are so unsound, they sell something termed, "junk bonds". They have very high interest rates, but also have a high probability of going out of business.
It's a risk/reward thing. The lower the risk, the lower the reward, and vice versa. |
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z_712001
 |
CD's
100% guarantee of princiipal
guaranteed minium interest rate
guaranteed marketabilty
Free of market risks
Usable as collateral
Free of Market Risk
Free of sales charges/loading fees
Municipal Bond
Interest is free of current tax
You can sell/redeem part before maturity w/o effecting int. rate on what you keep
Corp. Bond
You can sell/redeem part before w/o affecting int. rates on what you keep
Mutual Funds
Interest rates rises w/interest market
Usable as collateral
You can sell/redeem part before maturity w/o affecting int.rate on what you keep
You can make partial withdrawals in random amounts
Tax Deff annuties
This one does all of the benifits from the above plus...
The interest grows compounded, reinvested, & automatically added to original principal guarantee
Convertible to guaranteed lifetime income
Variety of withdrawl/settlement options for you or beneficiaries
Avoid probate delay fees and publicity
So, to answer your question... it depends on your needs... plus, it's nice when you don't have to go through a broker and pay broker fees...
I could help you with this or find someone who can :) |
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