Over time, a lot has been discussed on investing in Bonds. If you’re new to the realm of investing in Bonds, you can easily get intimidated because of all economic and mathematical concepts and the jargon used in Bonds. But don't give up just yet, Bonds aren't as complicated as they may appear (but they may seem a bit complex than stocks). Here is a list of the top three things you need to know about Bonds.
- Bonds are not That Complex
Bonds have several names depending on where you reside and the investors you hang around with. From, credit securities, debt instruments, to fixed-income securities and many others, but bonds are nothing more than IOUs in which the interest rate and the payment period is stated clearly in a legal document. What's more, Bonds have a predetermined repayment, and maturity date, which as compared to stocks, is more straightforward. With that in mind, you can then look at bonds differently now.
- Bonds Come in Three Major Types
As complex as Bonds may sound, it is crucial to note that Bonds are issued out in three major types as shown below;
- Investment grade: these are low-risk bonds that are sold by cities and corporations and other institutions.
- Safe-Debt Bonds: Governments and government agencies issue these. This type is considered safer by most beginner investments as it is direct and straightforward.
- High-Risk Bonds: These types of bonds are characterized by higher yield (paying) with a lower credit rating. The high payback is due to the higher risk of default. Hence not a favorite option for beginners.
Bonds tend to Move Opposite to The Interest Rates
Bonds tend to have an inverse relationship with interest rates. As interest rates rise, bond prices fall and vice versa. It is crucial to note that if you choose to hold your bond until it matures, you will swing the in the interest rates and the bond prices will not matter. However, if you sell your bond before it matures, the price you fetch will depend on the current interest rates in the market.
So if you are looking to get into debt investing, Bonds are the way to go. However, before you proceed to make your first investment, you need to choose an investment platform that not only meets your needs but also makes trading easy. CoinBits investment platform provides you with a variety of investment choices, objective research data, and analysis which you can learn from and access courses, webinars, articles, and the latest news to keep you informed on the markets. It is also a beginner-friendly and a great way to invest. It's also a great way to invest as they are free of liquidity risk, and you can buy them in small quantities and diversify your holding, which is quite safe to beginner investors.