Do More Than Invest And Forget
Those who find stocks volatile may find that bond investments are safer in contrast. They believe that it is so safe; in fact, that many people decide to invest in without fully understanding how it works. Those wanting to maximize their yield in bonds would do well to take notice of these five tips that I have penned for them:
1. Know the key terms with bonds. What do the terms par value, coupon rate, and maturity mean? These are the basic concepts of bond investing that you should be familiar with; if you can explain it adequately to someone, then that means that you understand them.
2. Calculate the yield. Do the number crunching and then compare it with other potential investments that interest you. This is easy to compute; get the interest that the bond pays in a year and divide it by it's current price, and voila! You have just computed the yield.
3. Check out the bond's rating. These ratings indicate the stability of the bond issuer's finances. Always review the bond's rating before you decide to invest. The standard is; the higher the rating, the better the bond's quality will be.
4. Be aware of the bond's the bond's interest rate risk. The interest rate and the bond price often go opposite ways; interest rate risk is the term that describes this relationship. A bond's price is likely to go down as interest rates go up. Long-term bonds are especially susceptible to interest rate risk.
5. Above all, think before you sell. The price of a bond in an ideal situation does not change; it will only do so if you buy or sell it before it matures. Factors affecting this change are the bond's maturity rate, transaction costs and interest rates. Examine the bond markets carefully if you're thinking about selling before the maturity. It'll help you determine if doing so would be easy or difficult. - 23159
1. Know the key terms with bonds. What do the terms par value, coupon rate, and maturity mean? These are the basic concepts of bond investing that you should be familiar with; if you can explain it adequately to someone, then that means that you understand them.
2. Calculate the yield. Do the number crunching and then compare it with other potential investments that interest you. This is easy to compute; get the interest that the bond pays in a year and divide it by it's current price, and voila! You have just computed the yield.
3. Check out the bond's rating. These ratings indicate the stability of the bond issuer's finances. Always review the bond's rating before you decide to invest. The standard is; the higher the rating, the better the bond's quality will be.
4. Be aware of the bond's the bond's interest rate risk. The interest rate and the bond price often go opposite ways; interest rate risk is the term that describes this relationship. A bond's price is likely to go down as interest rates go up. Long-term bonds are especially susceptible to interest rate risk.
5. Above all, think before you sell. The price of a bond in an ideal situation does not change; it will only do so if you buy or sell it before it matures. Factors affecting this change are the bond's maturity rate, transaction costs and interest rates. Examine the bond markets carefully if you're thinking about selling before the maturity. It'll help you determine if doing so would be easy or difficult. - 23159
About the Author:
The trading business carries no guarantee that you'll profit, and don't let anyone tell you otherwise. Rick Amorey instead suggests the comprehensive program of Emini Trading. Build up your portfolio with the help of Emini Trading System, and secure your future at a consistent pace.
posted by X - Men @ 2:44 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home