How To Find Good Bonds

How To Find Good Bonds

 As with every investment decision you make, you have to link the debate back to your investment objectives

To ensure that a bond is good, it has to be aligned to your investment objectives. Generally, when an investor wants to dabble in bonds, he/she is most likely to be investing with the future in mind. This is where a few good investing principles will kick into gear and help you make some important decisions. This chapter will reveal some basic things to look out for in a generic good bond, and how you can buy them without a brokerage.

1. Yield-To-Maturity – If you are looking to park your money in bonds and earn recurring income in the long run, you might want to adopt the “buy and hold” strategy. Always remember that whenever you buy bonds, your interest rate for that specific bond will be compared with the prevailing “risk-free” interest rates such as with treasury bonds. If your interest rate is higher than the risk-free rate, you might be required to pay a premium for the bond you wish to buy. This also means that at maturity, you will receive less money than what you have paid for. It is your duty to ensure that the extra interest rate you have made more than covers this amount. Always look at bonds with a reasonable interest rate.

2. Duration of Bond – Depending on your objectives, the duration of the bond will decide if the bond turns out to be a good, or mediocre investment for you. If you are looking to earn consistent recurring income without too much consideration of the bond value, you might want to look into longer-term bonds. Longer term bonds usually offer better yields than shorter term ones. …