Bond investing basics

If you are interested in investing in bonds then you may want to know some bond investing basics.Bond investing basics will cover what a bond is, why you may want to invest in bonds, how to invest in bonds and investment considerations for bond investing.

When looking at bond investing basics you will need to know what bonds are.Bonds are a debt security, like an I.O.U.Bonds are purchased by you the investor. You are lending your money to the institution that you bought the bond from.The institution you bought the bond from is called the issuer.The issuer agrees to pay you a certain amount of interest while you have the bond and then pay the principal back at the end of the bond maturity.

Bonds have a life expectancy and the life can start at 6 months and go up from there. When the bond comes due the issuer also agrees to pay you the purchaser the face value of the bond.There are bond types that you can choose form for example there are; U.S. government securities, municipal bonds, corporate bonds, mortgage and asset-backed securities, federal agency securities, and foreign government bonds.

Why would you want to invest in bonds is another bond investing basic. Many financial advisors will advise that investors have a few different ways to invest their money.Bonds are typically in the mix of what you should invest in.This is because bonds are predictable.They have predictable stream of payments, from the interest.And the repayment of the principal is predictable.Many investors like bonds so they can preserve and increase their capital or to receive dependable interest income.

How to invest in bonds is essential to bond investing basics.You can buy individual bonds, bond funds or unit investment bonds.Individual bonds have a huge variety to choose from.Most individual bonds are bought in the over the counter (OTC) market.There are some that are listed in the NYSE.The OTC consists of hundreds of securities firms and banks that trade bonds by phone or electronically.These bonds are usually sold in $5,000 denominations

Bond funds are similar to stock funds; they offer professional selection and management of a portfolio of securities.Bond funds can offer investors the choice to diversify risks across a broad range of issues.Bond funds also allow investors to have to option of reinvesting the interest payments or having them distributed periodically.

Bond unit investments offer a fixed portfolio of investments in government, municipal mortgage-backed or corporate bonds, these are professionally selected and they remain constant throughout the life of the unit investment.

When you are looking at bond investing basics, look at the interest rate, maturity, redemption features, credit quality and credit ratings.The interest rate of bonds can be fixed, floating or payable at maturity.The maturity of a bond refers to the future date that the investor will receive the principal of the bond back.There are short-term bonds, up to five years, intermediate term bonds, 5-12 years, and long-term bonds that are 12 or more years.

The redemption features are additional terms of the bonds.There are "call provisions" which provide for the issuer to repay the investors principal at a specified date.The "puts" in bonds allows the investor the option to require the issuer to repurchase the bonds at a specific time prior to maturity.

The credit quality refers to the quality and assurance of the bond.There are full faith bonds, like those issued by the U.S. government.Credit ratings are given to each agency that issues bonds.The ratings are based on analysis of the issuer's financial condition, management, economic and debt consideration and the revenue sources.Check these bond investment considerations out as part of bond investing basics.

Bond investing basics include knowing what bonds are, why invest in bonds, how to invest in bonds, and investment considerations for investing in bonds.By knowing and using these basics you will be able to invest in bonds with an educated mind.This way you can make educated decisions about your investments.