What is a bond? Is it profitable to invest in personal savings? If Yes, under what conditions?
The answers to these and many other questions you will find published below the article.
Briefly about the main terms.
The older generation still remembers the Soviet bonds. In the USSR this term designated state loans the population for the purpose of bringing additional funds into the economy.
In our days the same concept has a broader meaning. Modern bond — a financial instrument that, roughly speaking, allows you to borrow money at interest.
The structure, referred to as the Issuer (whether state, municipality or commercial firm) issues securities with an established nominal value.
A person having the necessary amount buys them. After a certain period a holder of securities is entitled to the return of the invested money with interest from the Issuer.
Duration of treatment on the bond market is divided into long and short term. The short-term are issued for a period from one year to 5 years, long term is 5-30 years. The more time that passes before the maturity, the greater is the potential return.
They also klassificeret liquidity. Some paper can be sold at any time.
Typically these securities are traded on the stock exchange in dematerialized form; their acquisition is required to open an individual investment account with a broker and give him instructions (or to complete the purchase through a terminal for electronic Commerce).
To decide whether to deal with bonds, compare their pros and cons.
The benefits of investing in bonds
- Compared to ordinary Bank deposits, bonds allow you to obtain not only the percentage, but the cost arising from the revaluation of the asset.
- They are considered to be relatively reliable — at least in terms of return of the invested amount. Especially robust Federal securities — Federal loan bonds: the guarantor of it directly serves the state.
What are the preferred bonds — government or corporate? Each option has its own advantages. Corporate securities, usually more profitable, but their sale is fraught with payment of the required tax of 13%.
Government bonds, as you said above, more reliable and are not taxed.
- In terms of yield of these securities sometimes very greatly inferior stock.
- The bond investment long-term is sometimes not enough profitable because of inflation — it manages to “eat” the interest promised.
- Investing in commercial firms, it is necessary to carefully examine the financial position of the Issuer. Bonds are typically released on a specific project, but it may not justify the high expectations.
- In order to sell bonds, it is necessary to monitor the situation and accurately predict the future level of interest rates. The portfolio is highly desirable to diversify — that is, spend all of their savings to the bonds of one Issuer and silently wait for a miracle is unlikely.
To deal with this financial instrument is more troublesome than traditional Bank deposits, but less dangerous in terms of losing money than with stocks.
He, in particular, is good for a beginner is capable of the investor or for someone who is professionally committed to display eggs in different baskets.