Given today's uncertain economy, many people are taking time to examine various
options for their financial future. Different types of investments are investigated and
bonds are one of the more popular choices considered. Many of the same people who talk
about investing in bonds, however, do not fully understand them nor where they place in
the economy. Many individuals believe that they should simply buy a bond and wait until
it matures before cashing it in. These people fail to realize that they may be losing a lot
of money due to the fluctuation of bond prices. At some point it may be more profitable
for them to sell their bond than to keep it until the payment date is reached.
There are many people who do not understand what bonds really are. A bond is an
agreement between two separate entities. One of these bodies gives, to the other, use of
their money for a period of time and, in return, may receive a "bond". The bond issuer
agrees to a fixed rate of return which he will pay the supporting person or business. This
fixed rate of return is an amount, in percentages, which is paid at regular intervals until
some future specified time ( the "maturity date"). Upon reaching the maturity date, one's
original investment is returned to them.
As previously mentioned, bonds are one of the more popular types of financial
investment in today's economy. There are many reasons why people invest in bonds. For
example, if one chooses a stable and profitable bond, it will provide a steady source of
income through interest payments during the lifetime of the bond. As well, the risk when
investing in a bond is considerably less than for most other forms of investment. The
bond does not, for instance, experience the volatility of a stock on the stock market, like
many other forms of investment do. Also, in instances where the issuer fails to pay the
principal amount back to the bond holder, legal recourse is available.... [continues]
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(2000, 12). Bonds. StudyMode.com. Retrieved 12, 2000, from http://www.studymode.com/essays/Bonds-30053.html
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"Bonds." StudyMode.com. 12, 2000. Accessed 12, 2000. http://www.studymode.com/essays/Bonds-30053.html.