Investment in Bonds: an Overview

Investment market is a highly complex and risky market. If you are a beginner and have no knowledge about the different investment options you have then you must first make an effort to know the investment market better. Money can be invested in a number of things like bond, stock, currency, property and so on. Experts advise that you must enter the investment market for the very first time by investing in bonds as these are considered to be investment options that have low risks involved.

Bond is nothing but a loan that you give to a federal agency, corporation, municipality, government and any such organization which is called the issuer. The bond has a fixed rate of interest which is given to you periodically. When the bond becomes matured, the issuer will pay you the principal (original value) cost of that particular bond.

An investor should make it a point to invest in different things so that his/her investment portfolio becomes diversified and his/her risk exposure is reduced. Thus as an investor you must invest in bonds as these help diversify your investment portfolio and reduces your exposure to risk.

The major risk involved in investing in bonds is the unduly rise or fall of the rates of interest. The rates of interest fixed on the bonds you invest in, can either help you make lots of money or lose huge amounts of money. When the rates of interest will increase, the costs of the bonds will decrease and then you will have to sell those at a lower price. Some other risks involved in investing in bonds are currency risk, liquidity risk and credit risk.

Before investing in bonds, you must approach a reliable financial advisor for help so that you can ensure higher or risk free return on your investment.

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