All You Need To Know Right Before You Invest In Bonds
| There are certain things you need to fully grasp about bonds prior to you start investing in them. Not understanding these things may cause you to buy the wrong bonds, at the wrong maturity date. The three most important things that should be considered when buying a bond consist of the par value, the maturity date, as well as the coupon rate. The par value of a bond refers to the amount of money you'll receive when the bond reaches its maturity date. In other words, you'll obtain your initial investment back when the bond reaches maturity. The maturity date is of course the date that the bond will reach its full value. On this date, you'll receive your initial investment, plus the interest that your money earned. Corporate, State and Local Government bonds may be 'called' prior to they reach their maturity. At this time, the corporation or issuing Government will return your initial investment, along with the interest that it has earned so far. Federal bonds cannot be 'called.' The coupon rate is the interest that you will receive when the bond actually reaches maturity. This amount is written as a percentage. You should use other information to find out what the interest will be. A bond that has a par value of $2000, having a coupon rate of 5% would earn $100 per year until it reaches maturity. Since bonds aren't issued by banks, a lot of people don't understand the best way to go about buying one. There are two ways this could be accomplished. You may use a broker or brokerage firm to make the purchase for you or you are able to go directly to the Government. Purchasing directly through the Government isn't nearly as challenging as it once was. There is a program called Treasury Direct which will permit you to buy bonds. All your bonds will be held in one account that you will have easy access to. If you use a brokerage firm, you'll more than likely be charged a commission fee. 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