Bond Market Investing

Bonds are securities that are issued by corporations and governments, and investors purchase them to keep their money safe and to grow it. An Bond Market investor can directly buy bonds, or buy them through a mutual fund investment. Here, you will learn about the various types of bonds available.

Bond type varies by issuer; there are corporate, foreign, government and municipal bonds. These bonds vary by their duration as well- there are short, medium and long-term bonds. Credit quality varies too; there are investment-grade, insured and junk bonds. Bonds can be tax-free or taxable, and each type fulfills a certain investment need.

Bonds are a good way to diversify a portfolio, supplement income, save on taxes and gain capital. Selection of bonds should be done based on your financial situation, taking into account your risk capacity and your resources. If you are an investor looking for a place to put your money for a little while, consider a short-term corporate or government bond.

Bonds carry with them different levels of risk, depending on their maturity and credit rating. All bonds are subject to interest rate and inflation risks. Bonds can be bought through your broker, the Treasury Deparment, or the secondary market. They can be bought through a CEF (closed end fund) or an ETF (exchange traded fund).

As investors deposit and withdraw money, mutual funds redeem and issue shares. CEFs issue a set number of shares, which are traded in the same manner as stocks. CEFs and mutual funds come with an investment manager and an objective, while ETFs are based on a bond index and are unmanaged.