Do More Than Invest And Forget
Many consider a bond investment to be the safer alternative to stocks. It has become so safe, in fact, that many people invest in it without even understanding how it works. If you want to maximize your yield in bond investing, you'll take notice of these five tips that I have penned for you:
1. Know your key terms. Are you comfortable enough with explaining to a person what a bond's par value, coupon rate and maturity rate mean? If you can comfortably talk about it with someone, then that means you understand them.
2. Compute the yield. Calculate the bond's yield and then compare it with the other investments that you're eyeing. It's easy to do; just get the amount of interest that the bond will pay in a year, and then divide it by its current price.
3. Know the rating of the bond. You will have an inkling of the bond issuer's financial stability through these ratings. Review these numbers before deciding to invest. The higher the rating is, the better the bond's quality will be.
4. Know your interest rate risk. If your interest rate turns left, then chances are your bond price will turn right. Basically, interest rate risk is the term that describes the risk that a bond's price will change as the interest rates fluctuate. Be careful of this when dealing with long-term bonds, those are the ones more susceptible to interest rate risk.
5. Always think before you sell. Prices don't change if you hold the bond until it matures, but you can make or lose money on bonds if you buy or sell before they mature. This amount depends on the bond's maturity rate, transaction costs and interest rates. If you're thinking about selling before the maturity, examine the bond market to determine if doing so would be easy or difficult. - 23162
1. Know your key terms. Are you comfortable enough with explaining to a person what a bond's par value, coupon rate and maturity rate mean? If you can comfortably talk about it with someone, then that means you understand them.
2. Compute the yield. Calculate the bond's yield and then compare it with the other investments that you're eyeing. It's easy to do; just get the amount of interest that the bond will pay in a year, and then divide it by its current price.
3. Know the rating of the bond. You will have an inkling of the bond issuer's financial stability through these ratings. Review these numbers before deciding to invest. The higher the rating is, the better the bond's quality will be.
4. Know your interest rate risk. If your interest rate turns left, then chances are your bond price will turn right. Basically, interest rate risk is the term that describes the risk that a bond's price will change as the interest rates fluctuate. Be careful of this when dealing with long-term bonds, those are the ones more susceptible to interest rate risk.
5. Always think before you sell. Prices don't change if you hold the bond until it matures, but you can make or lose money on bonds if you buy or sell before they mature. This amount depends on the bond's maturity rate, transaction costs and interest rates. If you're thinking about selling before the maturity, examine the bond market to determine if doing so would be easy or difficult. - 23162
About the Author:
Rick Amorey believes that shortcuts to success are a joke, and instead suggests the comprehensive program of Emini Trading. Be an educated trader with the help of Emini Trading System, and secure your future at a consistent pace.
posted by X - Men @ 2:55 AM
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