If you examine any investing portfolio, bonds will invariably be an important proportion of the asset allocation mix. On an average, bond investments encompass both US savings bonds and corporate ones issued by private companies. As an issuer, The US Treasury is the largest and safest issuer of savings certificates, which are considered secure investments given the backing of the United States Government.
It is very easy to purchase savings bond investments, either at your local bank or directly from the Treasury Department’s website. The advantage of savings bonds investments is the relatively low risk and the government’s ability to provide fixed interest rates.
Corporate bonds represent another major chunk of the investment mix. While these are subject to a certain amount of risk, were the issuer to fail or file for bankruptcy, most corporate certificates are rated by independent entities based on the level of risk inherent within the offering.
Most bond investments are either timed either as a short- or long-term investment strategy. These certificates, in addition to their fixed income potential, offer the additional benefit of offsetting a drop in stock prices in order to maintain the portfolio’s overall performance. This is very important, considering the relative stability of bond investments.
Bond investments — strategy is everything
As with any investment portfolio, diversification is the key to successful investing. The same applies to these as well and normally investors either eye short- or long-term gains. With these, too, you can diversify your portfolio by incorporating a mix of offers from several issuers. Not only the risk and rate of returns be distributed, your chances of overall, long-term growth would be multiplied manifold.
In addition to diversification, bond investments the individual investor’s goal would cause sharp fluctuations in the investment strategy. If the goal is to preserve the principal and earn interest, for example, a typical investor would hold it until maturity and reap regular interest payments while also recover the face value on maturity. On the other hand, if the goal were to maximize interest income, it is possible to get higher coupons on the long-term, which could be easily traded.
In addition to savings and corporate, there are also municipal and an assortment of local bonds.
Disclaimer: This article is not intended as investment advice. You must check with a qualified professional before making any investment decision.