Information About Bonds - Free Investment Tips

The things you must understand about bonds before you start investing in them. Not understanding these things may cause you to purchase the wrong bonds. The most important things that should be considered when purchasing a bond include the par value and the maturity date.

The par value of a bond refers to the amount of money you’ll receive when the bond reaches its maturity date. So, you’ll receive your initial investment back when the bond reaches maturity.

The maturity date is the date that the bond will reach its full value. On this date, you will receive your initial investment, plus the interest that your money has earned.

Corporate and State and Local Government bonds can be ‘called’ before they reach their maturity, at which time the corporation or issuing Government will return your initial investment, along with the interest that it has earned thus far. Federal bonds cannot be ‘called.’

The coupon rate is the interest that you’ll receive when the bond reaches maturity. This number is written as a percentage. A bond that has a par value of $2000, with a coupon rate of 5% would earn $100 per year until it reaches maturity.

Because bonds are not issued by banks, lots of people do not understand how to go about buying one. There are two ways this can be done.

You can use a broker or brokerage firm to make the purchase for you or you can go directly to the Government. If you use a brokerage, you’ll more than likely be charged a commission fee. Shop around for the lowest commissions if you want to use a broker!

There is a program called Treasury Direct which will allow you to purchase bonds and all of your bonds will be held in one account. This’ll allow you to avoid using a broker.