| uld consider investing in bonds for both income | | | | risk. Long-term bonds tend to rise and fall in price |
| and stability. In any given year equity markets | | | | more dramatically than do short term bonds; |
| could appreciate in value by 30 to 40 percent or | | | | these bonds are more susceptible to movements |
| decline in value by the same amount. Bonds | | | | in interest rates. In addition, bonds that provide |
| fluctuate far less. Bonds also pay interest on a | | | | higher coupon payments will fluctuate less than |
| regular basis and thus investors will receive a | | | | bonds that pay lower coupon payments. |
| cheque each month or quarter. | | | | Staggering the maturity dates of bonds, which |
| As with any investment, it is easy to get lost in | | | | mixes bonds with short, medium, and longer |
| the minutiae and with bonds the details come | | | | periods to maturity, as well as mixing the |
| from some of the arithmetical calculations that | | | | institutions issuing those bonds (to include |
| determine the yields, returns, and risk of a bond. | | | | governments and some corporate bonds) will |
| Here are the basics. Bonds offer a fixed amount | | | | allow you to build a diversified bond portfolio). |
| of interest (the coupon rate), until a fixed period | | | | Bond trading is done between dealers, which |
| of time (the maturity date) at which point the | | | | means that you won't be able to view a complete |
| denomination, also called the face value, is repaid | | | | auction market and its available quotes via the |
| and the interest payments stop. Bonds are issued | | | | internet or even the newspaper. These same |
| by the federal, provincial, and municipal | | | | dealers will be able to supply accurate calculations |
| governments, and by a wide variety of | | | | of bond yields and the current price. Investors |
| corporations. | | | | who invest in bonds directly as opposed to |
| In general, corporations have to offer higher | | | | investing in bonds through a mutual fund will save |
| coupon rates to sell their bonds. Maturity dates | | | | on fee; saving 1/2 of one percent can make a big |
| range from 1 year to more than 30 years, with | | | | difference to your net worth. Investors who |
| higher coupon rates being associated with longer | | | | want diversification and active management could |
| periods to maturity, to compensate for increased | | | | consider a bond mutual fund. |