| Bonds may not be as visible in the media as | | | | mutual funds that invest mainly in bonds and your |
| stocks. There's a lot more excitement that | | | | broker could advise you about other options like |
| surrounds the area of stocks which makes them | | | | 'pay as you go' plans. The trouble with bonds is |
| written about in the press a lot more. In fact, | | | | the fact that you can't trade them as easily as |
| there are investors who have never heard of a | | | | you would stocks. As far as stocks go, for most |
| bond even though they may have dabbled in the | | | | of us, it's a matter of a few clicks of the mouse. |
| stock market and even looked at instruments like | | | | Bonds however, require you to make that |
| traded funds and futures. However, the fact | | | | telephone call and not all bonds can be traded |
| remains that though bonds might not be as high | | | | through brokers. Bonds also attract a higher |
| profile and very often bring in lower returns, they | | | | commission. It's best to check with your broker |
| are probably safer and healthier. | | | | who will list out the options for you. |
| Stocks have a certain thrill that comes attached | | | | When you are looking at the short term, bonds |
| with them. Picture yourself buying a stock and | | | | are definitely less volatile. However, one thing they |
| waking up the next day to watching it having | | | | are sensitive to are interest rates. Bonds always |
| risen in value by 10%. It's heady, that feeling. And | | | | have a coupon rate while shares have dividends |
| of course, investors who watch their stocks | | | | which one could look at as interest being paid on |
| doubling in a few months feel that they are very | | | | the stocks though this could be sometimes |
| smart or they are very lucky! But inbuilt with the | | | | skewed according to the whims of the |
| thrill factor is also the factor of risk. Stock prices | | | | management. Where bonds are concerned, the |
| are extremely volatile and what goes up, up, up | | | | coupon rate is fixed at the time when they are |
| can come crashing down in a moment, totally | | | | issued. So if you are planning to sell your bonds, |
| unexpectedly. Very often, the swings can be | | | | particularly before their date of maturity, this rate |
| very large and rapid indeed. | | | | will be compared to other investments that give |
| Bonds on the other hand have a more boring tag | | | | interest. So you will find that the prices of bonds |
| attached to them. But if you look closely, they do | | | | are affected by not only what their coupon rate |
| come in a variety to choose from - reliable and | | | | is but also how far they have to go before their |
| unexciting U.S. or corporate AAA 10-year ones | | | | maturity. Bonds tend to be more influenced by |
| that give you a steady but small yield to junk | | | | government policies than stocks are. What could |
| bonds that can give you more than 15%! With | | | | affect bonds are massive borrowings, which could |
| bonds, too, you have to weigh them with the | | | | mean the government issuing bonds or by setting |
| same principles as you would stocks - the | | | | the prime rate lending rates or thanks to |
| calculated risk factor against the rewards you | | | | legislation that has an effect on insurance |
| hope to get. This is the standard trade-off. | | | | companies, banks or large institutions. |
| However, the risks in the bond market are | | | | Therefore what seems to emerge is that it pays |
| considerably lower and what's even more | | | | to have a diversified portfolio. Whether you |
| comforting, they are easy to calculate. | | | | directly buy them or you possess them thanks to |
| You need more capital for the initial investment in | | | | your mutual funds, bonds spell a lot more safety |
| bonds. You might only get one bond for a | | | | and would be a welcome addition to your |
| hundred shares of $10 stock. You'll also find | | | | investments. |