Different Types of Bonds

Investing in bonds is very safe, and the returns are usually very good. There are four basic types of bonds available and they are sold through the Government, through corporations, state and local governments, and foreign governments.

The greatest thing about bonds is that you will get your initial investment back. This makes bonds the perfect investment vehicle for those who are new to investing, or for those who have a low risk tolerance.

The United States Government sells Treasury Bonds through the Treasury Department. You can purchase Treasury Bonds with maturity dates ranging from three months to thirty years.

Treasury bonds include Treasury Notes (T-Notes), Treasury Bills (T-Bills), and Treasury Bonds. All Treasury bonds are backed by the United States Government, and tax is only charged on the interest that the bonds earn.

Corporate bonds are sold through public securities markets. A corporate bond is essentially a company selling its debt. Corporate bonds usually have high interest rates, but they are a bit risky. If the company goes belly-up, the bond is worthless.

State and local Governments also sell bonds. Unlike bonds issued by the federal government, these bonds usually have higher interest rates. This is because State and Local Governments can indeed go bankrupt – unlike the federal government.

State and Local Government bonds are free from income taxes – even on the interest. State and local taxes may also be waived. Tax-free Municipal Bonds are common State and Local Government Bonds.

Purchasing foreign bonds is actually very difficult, and is often done as part of a mutual fund. It is often very risky to invest in foreign countries. The safest type of bond to buy is one that is issued by the US Government.

The interest may be a bit lower, but again, there is little or no risk involved. For best results, when a bond reaches maturity, reinvest it into another bond.

Recent Investment Buzz

Peter Schiff Interviews Marc Faber - Marc Faber may be one of the great financial and investment minds in the world today. Many of his market calls have been extraordinarily accurate. In 2000 he predicted $100 oil; in 2001 he said buy gold; in 2002 he warned of a deteriorating dollar and an overvalued stock market. [Read More...]

More Federal Gov't Financial Genuis! - The Pension Benefit Guaranty Corporation (the Federal agency that guarantees pension plans) decided to switch billions from bonds into riskier investments such as stocks, foreign equity markets, real estate, etc., in early 2008 - just about the worst timing possible. Another case in which taxpayers are left footing the bill. [Read More...]

Financial Crisis Investing: How to Profit Even if the Curren - Hundreds of economic and stock-market indicators exist, but many won?t be relevant ? even if you could decipher them. Here are a few stock market indicators that are both reliable and readable to everyday investors. [Read More...]

Stock Market Investing for Dummies - Risk tolerance is critical for online stock market investing. When you?re just beginning to invest in the stock market, you?ll discover that each person has a risk tolerance that should be honored and taken into account. A professional financial planner worth his salt must understand this so he can help you determine your risk tolerance. [Read More...]

Money India - Financial Blog about stocks, share market, realty, investments, loans, credit cards [Read More...]

Bullish, Bearish, and Bankrupt Home Improvement Projects - Home ownership is a financial investment not unlike the stock market. When considering what home improvement projects make sense, here are 10 common projects who's stock is up, down and can lead the speculative home buyer into bankruptcy. [Read More...]