Making Money Through Bond Investing
Investments can help you make your hard earned money grow over time. In a sense, you try to make your money work for you through sound investments. There are many choices available for you. Bond investing is just one of your options if you are looking for ways to make more money.
What Is Bond Investing?
Bond investing involves putting your money in any of the different types of bonds available in the market. You should know that investing in bonds may be different from investing in stocks. Bonds and stocks are treated differently and therefore, may not follow the same investing methods. In order to understand investing in bonds better, you first have to understand how bond actually work.
What Is a Bond?
Basically, a bond is an IOU that a company or business issues to accumulate capital that it needs. A bond stands as a promissory note, indicating that the company will pay for the money it borrows from an investor in a stated amount and time period. In effect, the investor lends money to a company with the promise that he will get paid at a certain time and at a certain amount.
Bonds are different from stocks in that the former does not represent ownership. A bond only represents a promissory note, unlike stock shares that represents actual ownership of the company. Bonds are a safer investment compared to stocks. Investors are more likely to see, at the very least, a return of their capital investment, unless the bond issuer goes bankrupt. That is why government-issued bonds are considered as safe investments.
Aside from that, bonds also pay interest at set intervals during the term of the bond. It can provide investors with a cash flow that they can use or set aside for other investment opportunities. Interest earned from government-issued bonds is also tax-exempt. This makes such bonds ideal investments for people who look for investments that present lesser risk.
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