A bond is an instrument of indebtedness that represents a loan made by an investor to a borrower. There are different types of bonds which will suit your financial needs. It is an asset class where the investor lends an individual or business.
Bonds are typically issued by federal, state, or local governments, and corporations. As you might imagine, there’s a broad spectrum of potential risks and rewards among these different issuers. To determine which bonds may be best suited to help you reach your financial goals, it’s important to understand the differences between each bond type.
This video discusses the various types of bonds issued by firms and other organizations. It provides examples and explains the meaning of various bond charac...
Agency Bonds. These types of government bonds are offered by the financial institutions owned by the government. In the United States the Government National Mortgage (Ginnie Mae), the Student Loan Marketing Association ( sallie Mae) etc. are the ones responsible for offering agency bonds to the public.
The I Bond tracks inflation to prevent your earnings from being eroded by a rising cost of living. Series EE Savings Bonds issued after May 2005 earn a fixed rate of interest. Both types of bonds are exempt from all state and local income taxes. For more information about I and EE bonds see TreasuryDirect’s I and EE Savings Bond Comparison.
If you're looking for a safe, virtually risk-free marketable long-term investment, consider Treasury bonds - one of three major types of U.S. government debt securities issued by the Treasury.
Bond characteristics are important because they outline the conditions of the investment and the payment and interest terms. While defining a bond is usually more straightforward, the characteristics of a particular bond can differ based on the type of bond, the issuer, and the investor’s preferences.
Essay # 6. Bond Risks: Two types of risk are associated with investment in bonds, namely default risk and interest rate risk. 1. Default Risk: Default risk refers to the possibility that a company may fail to pay the interest or principal on the stipulated dates. Poor financial performance of the company leads to such defaults. 2. Interest Rate ...
Each type of investment offers a different level of risk and reward. Investors should consider each type of investment before determining an asset allocation that aligns with their goals. Investing Tips. A financial advisor helps you put together an investing plan that will utilize a number of the above types of investments.
When a bond matures, you can redeem it directly with the U.S. Treasury (if the bond is held there) or with a financial institution, such as a bank or broker. 5. Government bond funds