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A Comprehensive Beginner’s Guide To Investing In Bonds

A Comprehensive Beginner’s Guide To Investing In Bonds

Are you looking for an excellent way to invest your money? If this is the case, you may very well want to consider investing in bonds. These are different from stocks, but will still allow you to grow your wealth and capital. Within this guide, you will learn everything you need to know about investing in bonds!

What are bonds?

First and foremost, it is essential to learn about the basics of bonds. What are they? Well, these items can also be referred to as bills, notes and even debt securities. Truthfully though, they’re nothing more than an I.O.U. When purchasing a bond, you are actually lending your money to some type of entity, whether it is a government, corporation or federal agency. When they take your money, they provide you with a bond and a promise that they’ll repay you with interest, when the amount becomes due.

Different Types of Bonds

It should be known that there are several different types of bonds. Below, you will find a list of some of these.

  • Municipal bonds
  • Corporate bonds
  • US government securities
  • Federal agency securities

Remember that the bonds market can vary from country to country. Therefore, you may need to investigate a tiny bit further, if you live outside of the United States.

Understanding Your Investment

Before investing in bonds, it is absolutely essential to explore a number of different factors. Below, you will discover a breakdown of these factors for your consideration.

  • Understanding Risk – It should be known that all investments have some level of risk. Typically, a higher risk will always provide a higher return and vice versa. Therefore, you will need to know your limits and how much risk you’re willing to take.
  • Price – How much does the bond cost? This will be determined by a wide variety of different factors, including interest rate, liquidity, tax status, maturity, and supply and demand. Trading in the secondary market means that the price will fluctuate frequently.
  • Interest Rate – The interest rate can vary from bond to bond. It may be fixed, payable at maturity or floating. The interest rate is absolutely vital and will help you figure out precisely how much money you can generate over a period of time.
  • Maturity – The maturity will tell you exactly when your principal will be repaid. There are usually three different ranges, including short-term, medium-term and long-term. These can range between 1 to 30 years.

All of the factors above are absolutely vital for investing in bonds! Be sure to inspect them all, before making your decision.

Investing In Individual Bonds

If you wish to invest in individual bonds, you will be able to find a wide assortment of different options. The majority of these must be purchased in the OCT, over-the-counter market. A few corporate bonds can be found on the NYSE, New York Stock Exchange. Typically, you will find that bonds on the OTC market are sold at 5,000-dollar denominations.


At the end of the day, investing in bonds is an excellent choice, which will almost certainly provide you with profits, once your investment has been returned. Be sure to take your time and choose the bonds that are right for you! In the next article, you’ll learn about mutual funds.

  • Carter Crandall
    The key to bonds is having patience. They are slow to return but steady to return to you. Bonds are a very good idea to round out your portfolio and provides a great balance. Thanks for reminding us of these products and how useful they are.
  • Brad Silva
    I love bonds which are backed by the United States Government. You know that they won't default and that they the government will pay up. Bonds are also way better than having your money sitting idly in your bank account as your getting some interest. They are also good as diversifying your portfolio.
  • Dexterino
    I didn't new these things until I read this article. Thanks to Sam who continuously giving us daily information about almost everything in money managements. Before reading this article, I kinda wondered what bonds are. But it must be an important thing because it will potentially grow your investment... so I read about bonds on this article and the content is absolutely perfect for people who are not aware of these kind of things.
  • Lam Nguyen
    Another great article from Sam! I am trying to invest some money. Through this article, I am now aware of a new kind of investment. This kind needs you have a lot of patience waiting till your investment returns. You must be wise to understand the risk and what's the cost of it. If you take the risk, you may earn a lot of money. Thanks Sam. This is a really great article
  • Mark Wenger
    The single biggest mistake bond investors make is reaching for yield after interest rates have declined. Don't be tempted by higher yields offered by bonds with lower credit qualities, or focus only on gains that resulted during the prior period. Yield is one of many factors an investor should consider when buying a bond. And never forget: With higher yield comes higher risk.
  • insayyed
    Easily this is one of the best explained guide about investing in bonds. it is really helpful. When it comes to investment people make mistakes because their eyeballs grabbing higher yield investment instead of safe investment scheme. i am sure someone who read this article wont commit mistake in future. thank you Mr.Sam.
  • Wayne
    I knew of a few types of bonds, However individual bond are new to me.
    The importance to do research before investing is a wise idea.
    They are a lot of so called top notch experts out there, therefore, being prudent is a must.
  • Kevin S.
    Thanks, Sam! This is actually really helpful - I have always heard to invest in a mix of stocks and bonds, but what a bond actually is basically disappears in these descriptions. It is good to have a general understanding of what I am investing in - and it makes sense that these are generally of lower risk than other avenues, as the risk is more that the bond-type you are investing in goes under (e.g. government failure) but the reward is also lower.