What Are Bonds Investments?

What are bond investments?  Bond investments are means to make capital gains through buying bonds.  Bonds can be corporate; meaning issued by a private corporation, or more commonly, government issued bonds.  Bonds are simply loans made to the issuer, either the corporation or the government that are bought by investors.  When investing in bonds one is handing over money to the bond issuer in exchange for future repayment of the loaned amount in full plus interest.  Bond investments are repaid at what is referred to as the maturity date.  The interest amount paid over the life of the bond is known as the coupon amount.  Bonds are issued as a way to raise capital by the issuing entity.  The bond investments do not represent ownership in the issuing entity, such as is the case with typical stocks, but rather a loan and contract.  A bond will always state the amount borrowed the coupon amount, and the date of maturity.

Investing In Bonds

Buying bonds has been around since just after the turn of the century.  Most bonds are government issued bonds and considered sound investments for the investor who is seeking guaranteed interest payments and repayment of their original investment amount.  Bonds are guaranteed by the issuing entity and entail a legal contract for repayment.  When buying US Government bonds an investor is all but secured in knowing their investment will be repaid along with the interest amount promised.  Unlike stocks which can lose their value or even disappear should a company go out of business, bonds are very secure locations for your investment capital.  The downside to investing in bonds, especially government bonds with a high credit lending rating, is lower interest amounts.  The trade off with bonds then is more security for less return on your investment.  Buying bonds should be included into most stock investment portfolios as a hedge against riskier investments.

Related posts:

1. What Are Construction Bonds?
2. What Is Bond Maturity?
3. What Are Callable Bonds?
4. What Are Convertible Bonds?
5. How Are Bonds Funded?