
The art of investing money takes a great deal of research and skill. The process can be very overwhelming to a beginner. Thankfully, many options exist for smart investors in the form of bonds.
Types
Bonds come in many forms, including local or state government-issued municipal bonds, company-issued corporate bonds and U.S. government bonds.
Function
Mutual bonds are considered a lower risk than other bond types, in the sense that they earn the investor a profit in addition to protecting the principal investment.
Benefits
Aside from the low risk involved, a big plus for mutual bonds is the diversification they offer. Instead of making an investment in individual bonds, mutual bonds will also invest in other debt securities at the same time, without having to buy bonds from several different companies.
Risks
Despite being less at risk than other types of bonds, even mutual bonds are not without danger. Like any other bond, they are subject to problems with credit and interest rate changing for the worse after the investment has been made.
Considerations
Keep in mind that mutual bond funds typically come with a funds manager, which will result in more money required on the part of the investor.
References
- Federal Reserve Bank of San Francisco. "What Makes Treasury Bill Rates Rise and Fall? What Effect Does the Economy Have on T-Bill Rates?" Accessed April 23, 2020.
- TreasuryDirect. "Treasury Notes In Depth." Accessed April 23, 2020.
- TreasuryDirect. "Treasury Inflation-Protected Securities (TIPS)." Accessed April 23, 2020.
- U.S. Securities and Exchange Commission. "Municipal Bonds." Accessed April 23, 2020.
- U.S. Securities and Exchange Commission. "Corporate Bonds." Accessed April 23, 2020.
- U.S. Securities and Exchange Commission. "What Are High-Yield Corporate Bonds?" Accessed April 23, 2020.
- California State Treasurer. "Bond Concepts and Overview," Page 8. Accessed April 23, 2020.
- TreasuryDirect. "TreasuryDirect." Accessed April 23, 2020.
- U.S Securities and Exchange Commission. "Bonds." Accessed April 23, 2020.
- PIMCO. "Everything You Need to Know About Bonds." Accessed April 23, 2020.
- The Vanguard Group. "What Is a Bond? A Way to Get Income & Stability." Accessed April 23, 2020.
- Ally Bank. "Bond Mutual Funds." Accessed April 23, 2020.
- U.S. Securities and Exchange Commission. "Risk and Return." Accessed April 23, 2020.
- Standard & Poor's Financial Services. "S&P Global Ratings Definitions." Accessed April 23, 2020.
- Fidelity. "Bond Ratings." Accessed April 28, 2020.
- U.S. Securities and Exchange Commission. "Investor Bulletin Interest Rate Risk—When Interest Rates Go up, Prices of Fixed-Rate Bonds Fall," Pages 1-3. Accessed April 23, 2020.
- BlackRock. "How to Invest in Bonds." Accessed April 23, 2020.
- Fidelity Investments. "What Is a Yield Curve?" Accessed April 23, 2020.
- Financial Industry Regulatory Authority. "Bonds and Interest Rates." Accessed April 23, 2020.
- Rocket Mortgage. "How Bonds Affect Mortgage Rates." Accessed April 23, 2020
Writer Bio
Spencer Hendricks has written for various well-regarded blogs. His work has appeared in the "Kickapoo Prairie News" and online at sprayahen.com and Spencer Vs. The Food Industry. He is currently in the process of obtaining a degree in Web development.