Bonds are one of the most secure investments out there. If you are looking for a sound investment, bonds are the way to go. In this current economic crisis, no other investment vehicle can provide you with as much protection as bonds.
WHAT EXACTLY IS A BOND?
A BOND is a fixed income asset in which the stockholder agrees to loan cash to a company or government in replacement for a prearranged interest rate.
WHY BONDS ARE DIFFERENT
First, your money is guaranteed to be protected.
Second, bonds pay interest at fixed periods of time, which can give valuable earnings for retired partners, individuals, or those who need liquid cash flow.
Lastly, bonds can offer huge tax benefits. When a regime or government gives out different kinds of bonds to produce capital to construct roads, bridges and infrastructure, that interest that is earned is non taxable.
DIFFERENT KINDS OF BONDS
When most people think about bonds, they assume there is only one type. This is not true. There are various types of bonds each having distinct attributes and elements.
TREASURY BONDS, bills and bonds are vended by the U.S. Treasury Department. These are the safest assets in the world, since they are backed by the U.S. Government. For this reason, they tend to have the lowest interest rates.
In a U. S. SAVINGS BOND, your money is secure, but it isn’t through FDIC insurance. Savings bonds are supported by the full confidence and credit of the United States government.
A PREMIUM BOND is a bond issued by the United Kingdom government’s National Savings and Investments scheme. The government promises to buy back the bond, on request, for its original price.
SAVINGS bonds are issued by the Treasury Department and are in low enough sums that they are affordable to individuals.
A GOVERNEMENT BOND is a bond given out by a national government denominated in the country’s own coinage.
A SURETY BOND is a certain kind of bond which comprises of three distinct factions.They are the principal ( person protected from default), oblige (person owed cash or labor) and the surety( person promising to pay certain sum of cash).
CORPORATE BONDS are given out by various conglomerates, and are ranked as to there risk by Moody’s or Standard and Poor’s. The higher the risk, the higher the profits the company must guarantee.
MUNICIPAL BONDS are issued by various cities. These are excise free, but have slightly lower interest rates.
Overall, bonds have the reputation of being one of the safest investment vehicles around.
Sources:
http://useconomy.about.com/od/bondsfaq/f/Savings_Bonds.htm
http://useconomy.about.com/od/bondsfaq/f/Municipal_Bonds.htm
http://financialplan.about.com/od/savingmoney/a/SavingsBonds.htm