Investment Articles

As a bond investor, one must thoroughly understand interest rates, the most basic feature of bonds. The value of a bond investment is very much dependent on today’s interest-rate environment and the potential future interest-rate moves.

Coupon Rate

Bonds as fixed income securities pay a set coupon rate, the rate used to calculate periodic interest payments on an issue. Two things affect the coupon rate: the issuer’s credit quality and the issue’s duration. In general, the better the credit quality and the shorter the duration, the lower the interest rate, and vice versa.

Yield

Unlike a coupon rate that stays constant, the actual yield(to maturity) on a bond fluctuates as the result of the changing supply and demand in the trading, any changes in current interest rates, as well as in the perception of future interest-rate moves. For an investor, the yield is the coupon payments relative to the purchase price of the bond, which changes over time for the same above-mentioned reasons. And a bond yield moves in opposite direction to the price.

As interest rates have come down so much in the last couple of years, bond prices have risen accordingly and that has been good for investors. But the question now is that if interest rates can’t drop much lower from today’s historical low, what would that bode for investors, especially when inflation expectation starts setting in? One has to think about possible dropping in bond values down the road.

Interest Rate Sensitivity: Short Term vs. Long Term

Investors care a lot about how much their bond holdings are sensitive to any interest-rate change, because moves in interest rates will be reflected in the changing of the bond prices, thus the value of their holdings. In a rate-tightening environment or a would-be one, longer-term bonds are more sensitive to rate increases. This is because such a potential bond holder would be locked up for too long at a lower coupon rate.

Now the investor would be unable to earn any ongoing higher rates, and thus would demand a higher yield by paying less when purchasing the bond, effectively driving down longer-term bond prices. Should there be a future tightening and should the tightening become progressive as the current economic recovery continues moving forward, there could very well be losses of value on longer-term bonds.

On the other hand, shorter-term bonds would be less influenced by upward moves in rates in terms of investors demanding a higher yield and thus there wouldn’t be much downward pressure on shorter-term bond prices. In fact, as investors contemplate whether interest rates will really go up, they would like to get into shorter-term bonds for the flexibility that shorter durations offer, potentially driving up shorter-term bond prices and delivering better returns for those shorter-term bond holders.

Investing in bonds is a lot about evaluating current interest rate environment and anticipating future interest rate moves.

Charles E. Johnson is an entrepreneur and the current owner of Articleportfolio.com. For more information on the bond market and investing in bonds, visit the Articleportfolio.com bonds page here: http://www.articleportfolio.com/buying-bonds.html.

We all make mistakes, however, it can be a costly one if you do not know what the Municipal Bond Rates are. There are many factors in these rates, and it is best to avoid any mistakes made, to make sure you have a good investment on you hands.

They don’t know what the ratings mean.

They see these groupings of letters, scratch their heads, and buy them anyways. They could have bought a bond with a bad rating on it, and wouldn’t even know the difference. Besides the fact that it wasn’t paying out when it was supposed to.

The best rating you can get is Triple A’s, and worst C. If you find yourself with a C rated bond, try to dump it, and recover some of your money, because this bond has been determined to have a very high risk of repayment.

They do not do their research on the city who issued the bond.

Some people just buy these bonds as if there is no risk involved. However, like any other kind of investments, there is always a risk.

To make sure you buy a good bond, do your research on the city that is issuing the bond. Make sure they have a positive growth, and a stable economy in place. If they lack any of these things, they will most likely have trouble paying back the loan (which is what a bond is).

Now that you have gone over these 2 mistakes, you will be able to make sure you have a good Municipal Bond Rates on your next investment. Make sure the city has a positive growth rate, and a stable economy to insure repayment on this debt. Without that, you will not know which will be your best investment. So do your own due diligence and read up, before you open your wallet.

Tired of making poor investment choices? Having trouble choosing the right bond to go with? To learn more about Municipal Bond Rates, and make that right bond investment, then you need to go to this website now http://municipalbondrates.org

There’s no doubt about it. Investing is tough today. As a new investor I once read that “today is always the hardest time to invest money”. Well, with today’s investment options personal investing is no walk in the park. Are there ANY investment opportunities out there?

There are basically four asset classes or investment options. Let’s see where we might want to invest money, and where we might want to lighten up. We start by looking for safe liquid investments like savings alternatives and cash equivalents. Short-term CDs, savings accounts, and money market accounts at the bank are paying less than 1%; and money market securities (like T-bills) and money market funds are paying even less. No investment opportunities here, but a safe place to invest money.

Our second category of investment options is bonds. The average new investor might own bond funds, but unfortunately knows little about them. When you invest money here you earn more interest than above, but you give up the high safety. With interest rates at or near all-time lows you do not want to invest money heavily here, because when interest rates go UP the value of a bond investment will go DOWN.

Stocks (often called equities) are where most investors invest money to earn higher returns and get real growth. In a questionable economy like today’s a blanket bet on the good old U.S. stock market is riskier than usual. In 2009 stocks were up 60% in a matter of months in anticipation of better times ahead. If good times don’t develop, look out below!

You can make money investing in stocks in just about any market because there are always at least a few investment opportunities out there. That said, the odds of a new investor finding them are about nil – unless he or she knows what to look for. When the stock market falls the vast majority of stocks go with it. This brings us to the last of our investment options, alternative investments.

When you invest money outside of the box you are searching for investment opportunities that do not fit into one of our first three categories… alternative investments. With the exception of real estate, the new investor rarely ventures here. Over the past few years professional money managers have paid more attention to these less traditional investments in search of investment opportunities.

In theory, there is always a good investment somewhere. And the world of investing is full of investment options, from aluminum to zinc. To mention a few: real estate, oil, gold & silver, copper, other commodities, currencies, and foreign securities. The good news is that the average investor can invest in these alternative investments by simply owning stocks and mutual funds.

Investing today requires that you pay attention to the trends in various sectors and industries. When the stock market heads south some industry sectors or specialized areas buck the general trend. If gold prices soar gold stocks and gold funds go along for the ride. When basic materials prices or the price of oil goes up, stocks and mutual funds in or invested in those sectors generally follow suit. In a bad U.S. stock market some foreign markets manage to prosper.

Investing today is a challenge as uncertainty remains high. Don’t avoid safe investments just because interest rates are low, and don’t rely heavily on U.S. stocks and bonds. Get familiar with alternative investments. Spread your wings and diversify.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals. Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

Are you interested in bond investing? If so, there are a few key considerations that you must keep in mind before you invest. These are some timeless finance principles that will help you attain your financial goal that you desire.

For a start, consider how bond investing is going to be part of your investment portfolio. As the saying goes, you should never put all your eggs in a basket. That is why you should diversify your investment wisely. Depending on your risk appetite, you may want to split your investments between stocks and bonds.

A more aggressive investor may choose to hold up to 90% stocks and 10% bonds while a conservative one may choose to have his investment in 70% bonds and 30% stocks. Whichever you choose, you want to be comfortable with your allocation.

Next, it is time to consider the type of bonds you want to invest in. Bonds come in many different forms and that includes Treasury bonds, municipal bonds, corporate and many others. At the same time, you will have to consider the duration of the bond holding period.

That means you need to decide if you want to invest in freshly issued bonds or those that have been on the secondary market for some time. Financial experts advice us to take into consideration of our age, income, tax bracket and financial needs before investing.

A good way to check your returns on bond investing is to determine the returns and risks that come with your bonds. As the value of bonds is closely linked to interest rates, their values can change quite dramatically too.

Like any investment tool, the more you know, the better your chances of getting a decent return on your bond investments. When in doubt, you can always seek the advice of professional financial consultants to help you.

If bond investing is something you seek for your financial portfolio, you need to visit http://www.investmentgradebonds.net as that is where you will have the latest information and resources on bond investments.

It can seem daunting at times to try and break into investing, after all, you may be simply wanting to make some basic investments, but find yourself confronted with a variety of different terms that you aren’t completely sure what they mean.

To help you with this, several common investment terms are defined below. This should be enough to get you started with some of your investments, at the very least; it should be noted, however, that this is nowhere near a complete list of investment terminology that is used today.

Stock

A stock is a type of investment that signifies a partial ownership of a publicly- traded company. Each share of stock purchased is an equal portion of ownership that grants the same rights and privileges as every other share of the same type of stock. Some shares of stock may be designated as “common” or “preferred”… these are very similar, though preferred stock usually gives up the voting rights of the shareholder in exchange for advanced dividends and more security in case of a bankruptcy.

Bond

A bond is an investment into a loan fund issued by a government or institution. The bond pays interest for the term that it’s active, meaning that the longer you have your bond investment the more interest you’re going to collect. Once bonds reach their maturity date, the bond expires and the total amount earned is paid to the investor.

Index

An index is a grouping of different investments that cover the same items. Common indexes are precious metals, diamonds, and industrials. Indexes can often be invested in as a broad fund in much the same way that you invest in stocks.

Mutual Fund

A mutual fund is an investment that allows individuals to invest their money into a previously-created diverse portfolio that usually contains a variety of stocks, bonds, indexes, and other investment opportunities. Investors in a mutual fund are usually considered to own shares in all stocks included in the fund.

Dividends

Dividends are a portion of a company’s earnings that are distributed among shareholders at the discretion of the company’s board of directors. Dividends may be paid in cash, shares of stock, or other means.

Money Market

A money market account is a type of mutual fund that invests in different loans and financial services while attempting to keep the initial investment low. Interest is paid on the investments as it is collected.

Bull Market

A bull market occurs when investment prices are either on the rise or appear likely to rise in the near future. It is also referred to as an optimistic market, and tends to have larger amounts of long-term investment.

Bear Market

A bear market occurs when investment prices are either falling or appear likely to fall in the near future. It is also referred to as a pessimistic market, and tends to have larger amounts of short-term investment in order to get the most out of temporary gains and avoid long-term losses.

Futures

Futures are investments where an individual pledges to purchase or sell certain commodities at a future date for a certain price. This is often used to get a lower price on commodities that will be resold later for a higher price.

Margin Trading

Margin trading is where a stock broker allows individuals to purchase shares of stock for a portion of the price, with the broker lending the remaining amount. The borrowed amount must be paid back when the stock is sold, and service fees must be paid to keep the margin account open before that time.

Jerry Warner writes general finance and loan articles for the Loans UK Online website at http://www.loansukonline.co.uk

The best investment strategy for most people is to KEEP IT SIMPLE. Don’t complicate things when investing money or you’ll likely feel uncomfortable and lose interest. Here we offer a simple solution for both choosing investment options and asset allocation.

The best investment options for most people who want simplicity: index funds. You don’t need to worry about fund performance since these are mutual funds that track a stock or bond index. Plus, the cost of investing money is low if you go with a major no-load fund company.

The other half of the investment strategy equation is called asset allocation. To keep it real simple, you will be investing in three different types of mutual funds: stock index funds, bond index funds and money market funds. How much (what percent of your total investment assets) should you invest in each?

Best investment strategy for most people: 50% to stock index funds and the rest split evenly between bond index funds and money market funds. Investing money with this asset allocation puts half of your money at risk in an attempt to make greater profits. The other half is safer and pays interest in the form of dividends.

Your bond fund will generally pay more interest, and you will benefit when interest rates are stable or falling. When interest rates rise expect losses in any bond investment. Money market funds, on the other hand, benefit when rates go up and rarely (if ever) fluctuate in value.

If you want higher safety put more money in your money market fund than in your bond fund. For greater income in this safer half of your portfolio, invest more in your bond fund. Otherwise just go with our original asset allocation above.

Now, you know how to set things up. But to have a complete investment strategy you need to manage things over time. We’ll keep this simple as well.

Don’t let your allocation numbers get out of line as time goes by. If you started investing money with 50% in stock index funds and the other half evenly split as suggested … keep it that way. At least once a year review your progress and your percentages. Move money around when necessary.

For example, you see that your stock fund accounts for only 45% of your total vs. your original allocation of 50%. Move money from your other two investment options to get back on track.

Why I call this the best investment strategy for most people: It’s easy to set up and implement; and you can make better returns than many investors without the risk of taking huge losses like many do in a year like 2008.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

When you buy a bond, you are actually loaning your money to the organization that issued the bond. That is why bonds are often called “debt instruments.” The principal (the “face value” of the bond) is repaid on the maturity date. In the meantime, you are paid a set amount of interest, usually every six months. This interest is called the “coupon” or “coupon rate.” It’s called that because bonds used to come with little coupons attached that you would cut off and send in twice a year to receive the interest payment. Nowadays, the coupon rate is nothing more than the annual interest rate.

When deciding which types of bonds to invest in, it’s important to know all you can about each. Among the types of bonds you can choose from are:

Treasury Bonds

Treasury bonds, also known as “T-bonds” for short, are issued by the United States government and are considered to be the safest of the three bonds. The only risk is if they are sold prior to maturity (but this holds true for all bonds). Super-safety comes at a cost, though, and in the case of treasury bonds that means lower returns than other bonds.

Interest is paid on treasury bonds twice a year, and can be purchased in maturities ranging up to 30 years. All T-bonds bonds are issued in face values of $1,000 with different purchase minimums with each type of security. It is impossible to redeem a treasury bond before maturity, and interest payments stop as soon as the bonds mature.

Corporate

Corporate bonds are issued by companies in order to raise capital. While they can be very safe investments when issued by strong, established companies, the reverse is true for companies that are not rock solid. Unlike treasury bonds, corporate bonds have what is known as a “call provision”, which allows the bond holder to get their principle investment back before maturity.

Most corporate bonds have fixed interest rates, and some, called “zero coupons” are sold at a significant discount in exchange for the bondholder agreeing to wait until maturity to receive interest payments.

Because determining which companies are strong and which aren’t can be very tricky, there are companies who evaluate the fiscal integrity of various corporations to determine their bond-worthiness. Moody’s Investors Services and Standard and Poor are two examples of such rating companies.

Municipal

Municipal bonds are issued by state, county, or city governments for the purpose of financing government sponsored functions (I.E., building a highway or a school), or for other “non governmental” purposes, such as raising money for low income housing or student loans.

Municipal bonds, like T-bonds, pay interest twice a year. These investments can be very safe, but do carry risks as well. Moody’s and Standard & Poor rate municipal bonds based on their credit quality, so when investing in them, it’s a very good idea to use these ratings as a guideline.

Municipal bonds are subject to significant market risk if sold before maturity.

Maintaining a Diversified Portfolio

Many personal financial advisors recommend that investors maintain a diversified investment portfolio consisting of bonds, stocks and cash in varying percentages, depending upon individual circumstances and objectives. Because bonds typically have a predictable stream of payments and repayment of principal, many people invest in them to preserve and increase their capital or to receive dependable interest income. Whatever the purpose-saving for your children’s college education or a new home, increasing retirement income or any of a number of other financial goals-investing in bonds can help you achieve your objectives.

Assessing Risk

All investments offer a balance between risk and potential return. The risk is the chance that you will lose some or all the money you invest. The return is the money you stand to make on the investment.

The balance between risk and return varies by the type of investment, the entity that issues it, the state of the economy and the cycle of the securities markets. As a general rule, to earn the higher returns, you have to take greater risk. Conversely, the least risky investments also have the lowest returns.

The bond market is no exception to this rule. Bonds in general are considered less risky than stocks for several reasons:

• Bonds carry the promise of their issuer to return the face value of the security to the holder at maturity; stocks have no such promise from their issuer.
• Most bonds pay investors a fixed rate of interest income that is also backed by a promise from the issuer. Stocks sometimes pay dividends, but their issuer has no obligation to make these payments to shareholders.
• Historically the bond market has been less vulnerable to price swings or volatility than the stock market.

The average returns from bond investments have also been historically lower, if more stable, than average stock market returns.

Investor Public Relations
http://www.TheSUBWAY.com

Submitted by Christine at NewSunSEO Inc.
http://NewSunSEO.com

Bonds and bond funds are the way to go if you want to earn higher interest rates according to your neighbor who knows everything. Bond investing is simple if you invest money in bond funds because they do the investment management for you, he points out. Since interest rates are pathetically low at the bank, why not take his advice?

People invest money in bonds and bond funds to earn a higher income in the form of interest or dividends (bond funds). That’s the advantage of bond investing. On the other hand, your not-real-savvy neighbor neglected to tell you the other half of the story. Bond investing always involves risks. Even the safest bond investment in the world, U.S. Treasury bonds, is subject to interest rate risk.

Interest rates are at or near historical lows, which makes it tempting to chase higher interest income. A bond investment pays a higher rate of interest than you can get at the bank. But here’s the problem, the risk factor most folks know little about: a bond has a fixed coupon rate (interest rate) that never changes for the life of the security.

All bonds have a maturity date … they mature. At that time the owner is paid back his or her principal, usually $1000. Example: You buy a $1000 bond with a 6% coupon rate that matures in the year 2020. This investment pays you $60 per year in interest for as long as you own it. In the year 2020 the issuer (a government entity or corporation) pays you back the $1000. It’s a done deal, the bond no longer exists.

The interest rate of 6% is fixed. But the price or value of your investment is not. Bonds trade just like stocks do. What happens if interest rates go up across the board? Well, banks will raise the rates they pay their customers. And new bonds will be issued by the government and corporations WITH HIGHER AND HIGHER COUPON RATES as interest rates continue to rise.

Interest rate risk: what happens to the value or price of your 6% bond when new issues are paying 7%, then 8%, then 10% and so on? Your bond’s price (value) will fall. Who’s going to pay you $1000 for this investment that only pays $60 a year in interest when they can go out and buy a new issue that pays $70, $80, $100 a year?

In the above scenario bond investing is a losing proposition. If you own bonds when interest rates are moving up significantly your interest earned will pale compared to the loss of value your investment suffers. If this trend continues for several years, your brokerage or mutual fund statements will show losses for several years.

IF you had invested in an individual bond issue in the above scenario (like our 6% example) you could always look forward to your investment maturing and to getting out with $1000 at maturity. But what if you took your neighbor’s advice and you did invest money in a bond fund that held a large and diversified portfolio of securities similar to our 6% issue maturing in 10 years or so?  Bond funds don’t mature.

What would happen to your bond fund investment as interest rates continued upward? Well, many investors, like your neighbor and his friends, would cash in their bond fund shares to cut their losses. This means the fund must then sell bonds in their portfolio (likely at a loss) to raise the cash to pay them. As this trend continues bond prices continue to fall, along with the value of bond funds in general.

If and when interest rates eventually stabilize at higher levels, there won’t be many happy campers who took your neighbor’s advice. Those who cashed in took a loss. Those who held on are hoping for a miracle.

The bond market will then heal only when savvy investors seize the day and bet that interest rates are done going up. At that point they buy bonds and send prices up. That’s how smart investors really make money bond investing.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

It’s time to invest money and you’re confused by the millions of investment options out there. This money guide will make things simple for you. There are only 4 basic investment options in the world. Buckle your seat belt for this whirlwind tour; we’ve got a lot of ground to cover in a few hundred words.

Investment option #1: SAFE INVESTMENTS that pay interest. There are two ways to invest money here. First, in savings vehicles like bank CDs, fixed annuities, fixed accounts in retirement plans and savings bonds. Your principle is fixed and safe, and your interest rate is also fixed, sometimes for a specified period of time.

The second type of safe investment is cash equivalents, commonly just referred to as “cash”. This investment option includes high quality money market securities like T-bills (short-term), savings and money market accounts, and money market mutual funds. Your principle is fixed and safe, but the interest rate paid is not fixed for long and/or subject to change.

Option #2: BONDS. This does not refer to U.S. Savings Bonds. Included here are treasury bonds, corporate bonds, municipal bonds, and so on. Here the interest rate paid is fixed and does not change. Your principle is not fixed, which means that the value of your bond investment will fluctuate. When you invest money in bonds, you can lose money. The advantage: higher income in the form of interest vs. option #1.

Investment #3: STOCKS are variable investments and fluctuate in value significantly. People invest money in stocks to get growth and to a lesser extent income in the form of dividends. A stock’s price is not fixed, and dividends are subject to change and can be eliminated altogether. The advantage here: higher potential returns as stock prices rise.

Investment option #4: ALTERNATIVE INVESTMENTS. This includes virtually all “other” investments, and here is where you need to think outside the box of traditional investing. Commonly, most folks do not have the time, expertise, or inclination to invest in real estate, natural resources like oil, gold & silver, foreign investments, commodities like soybeans and corn, and the list goes on.

The fact that all “other” investments are lumped into a single category should tell you something. The first 3 are your major investment options, and have traditionally been the kingpins for diversification and investment strategy. More and more financial advisors now believe that alternative investments should get the attention that they deserve. Advantage: they add even more valuable diversification to your portfolio.

This money guide believes that a good sound investment strategy will include investments from all 4 categories. Where can you invest money to offset losses in a bad stock market? The answer: alternative investments.

Now, to wrap things up, is there an easy way to invest money in each of our 4 basic investment options? You bet there is … mutual funds. All within a major fund family you can find the following, from #1 to #4: money market funds, bond funds, stock funds, and specialty funds.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com