Bonds and bond investments: What you need to know

Investing in bonds is one good way to earn money while preserving your capital.

16:08 04 February 2013

Bond investments basically work in this way; investors lend money to issuer (which could be the municipality, government, corporation, and other entity) in exchange of interest on the maturity date plus the capital.

 

Among other forms of investment, investing in bonds is relatively safe. It’s perfect for those people whose main objective is to preserve capital and earn interest all at the same time. 

 

Wise investors must know that putting all their money into one investment basket is dangerous. Should the company you invested in goes bankrupt, you’ll most likely to lose all of your money.

 

In order to avoid this from happening, you are encouraged to diversify your portfolio. Depending on your goals and time frames, you can allot a certain percentage of your investment on equities and on bonds. 

 

When investing on bonds, it’s crucial that you choose as many different bonds as possible. Again, diversification is crucial in investing. Also, check out and thoroughly research the issuer’s reputation. You would want to make sure that you’d make money from this endeavour.