How Do Bonds Work
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As with any investment there are risks. Purchasing lower rated bonds will earn you a higher rate of return, but there is a reason for that. Those bonds are more risky and if the company defaults you'll be out of luck. As long as you invest in higher rated bonds you will be relatively safe and you'll earn a somewhat decent return.
With investing, you'll always encounter some kind of a risk. If you want 100% safety, stick your money in a GIC. That's not investing though.
pbbb07 1 month ago
When interst rates go up, the opposite happens. Your bond is less valuable since newer bonds will give a higher interest on an investment. The result is the value of your bond will go down. By selling now, you will lose some money. Over the life of a bond it's value will fluctuate with the interst rate. Once the bond matures, it always sells back at par. Thus, by holding a bond to it's maturity date you will get your money back and you will earn interst income during that time.
pbbb07 1 month ago
@housechores Bonds are quite a safe investment. When a bond is issued it is sold at par and you are given a certain amount of interest each year for holding that bond. As interest rates decrease, your bond will become more valuable since newer bonds will give you interest on your investment at a lower rate than what your bond gives. IAt this point your bond will be worth more than you paid. By selling now you'll get a gain on your investment plus you would have earned interest.
pbbb07 1 month ago
All citizens(and non-citizens) buy US treasury bonds. Go to the US treasury website and buy a bond!
cris750 7 months ago
Can I sell a bond at any given moment, say 1 day after I buy it? If the return in one year should be 8%, then should the return in the aforementioned situation be 8/365% (given that the issuer is doing financially well)?
smokenfly514 1 year ago
Bonds of any kind are not safe. If you buy at the wrong time you can wind up with a negative return on your money. Subtract inflation and result gets worst. For instance, now is not a good time to buy. Much of the price is too high as investors departed equities and into less volatile bonds. They don't plan on staying in. When they find something better they leave in waves with you holding the more expensive bond. Risk isn't worth it IMO. CDs are better as far as safety.
housechores 3 years ago