Can anyone shed some light on buying bonds?

[Gunz4Sale]

I was reading in this magazine that buying bonds is a low risk way of investment, and I was wondering if this is a good look for someone trying to get started in investing and financial planning? I was looking at maybe an E/EE or I bond. Can anyone tell me which would be a better option?

[NisAznMonk]

In for advice too...

[Pavement_Scraper]

in for some advice also

[Kohinoor]

check out www.bondsonline.com for info

bonds are a great way to invest and there are so many to choose from

[Limeade]

bond's are a great investment vehicle. But realize this, they are low risk, but not devoid of risk. A company issuing the bond can still default, although that is unlikely. Also realize this isn't like wall street, expect mediocre returns, as with anything, less risk, smaller returns, greater risk.... and you know the story. Local bonds "Think Taxes and Municipal bonds" have better tax advantages because the gains can be deducted.

[Kohinoor]

to educate yourself on bonds:

http://finance.yahoo.com/education/bond

[Kokis93lude]

bond's are a great investment vehicle. But realize this, they are low risk, but not devoid of risk. A company issuing the bond can still default, although that is unlikely. Also realize this isn't like wall street, expect mediocre returns, as with anything, less risk, smaller returns, greater risk.... and you know the story. Local bonds "Think Taxes and Municipal bonds" have better tax advantages because the gains can be deducted.


^^^what he said.

[aznsupra]

there is always risk in bonds. try telling some of my clients who were down more than 15% in their tax free AAA rated insured muni portfolio that its still a low risk investment.


LIMEADE gains CANNOT be deducted. muni's generally offer tax free income, big difference there.

[Limeade]

there is always risk in bonds. try telling some of my clients who were down more than 15% in their tax free AAA rated insured muni portfolio that its still a low risk investment.


LIMEADE gains CANNOT be deducted. muni's generally offer tax free income, big difference there.

I said it wrong, but yes you are correct. As far as bonds not being low risk... well I'm not sure what you classify as low risk. I guess that would depend on how risk adverse they were. But generally non callable bonds are considered fairly low on the risk spectrum are they not?

Correct me if I'm wrong.

[joshoowa]

In a nutshell...bonds are part of a company's debt and is not equity. There are pros and cons about it being classified as debt but thats not important as of right now. There are different types of bonds, here is a list but not limited to: U.S. bonds, state & municipal bonds, and private/public company bonds (municipal bonds are tax exempt). Companies rated by various rating companies (morning starr, moodys, s&p) to give you a very general idea of the company's financial standing. The general rate for a bond would fall into investment grade (triple a down to triple b -) or non investment grade (anything less than triple b -). Investment grade is "safer" than non-invest but companies can still default and no be able to pay back. Non-investment grade are speculative, junk bonds, that can yield high returns but at riskier odds. Large known companies tend to fall into investment grade, where as less known companies that need cash to do something fall into non-invest.

Now for bond structuring, there are so many different types of bonds far and wide that it really depends on what you are looking for. I have invested in coupon+principal bonds and no coupon bonds, these are the two typical bonds people think of when looking into bonds. Coupon+principal = you pay X amount, receive coupon payments (similar to interest payments), and receive principal at maturity. no coupon bond = you pay less than the principal, receive no coupon payments, and receive the principal at maturity. U.S. saving bonds are like no coupon bonds. There is tax incentives to go no coupon because you don't pay taxes until maturity, where as coupon+principal you do pay taxes annually on the coupon payments.

Hope that helped :)

[joshoowa]

Totally didn't read OP question. E/EE bonds, tbills, tbonds are all from the federal gov't, they are low return/ low risk, LOL low risk, practically no risk because its the federal government. Honestly there are savings and money markets from banks that can yield higher returns than the govt and still be liquid. If you are really into investing bonds look else where