How To Guide For: Understanding What A Bond Is And Whether It Is A Good Investment

A Bond is a debt security, similar to an IOU. Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time. When you buy a bond, you are lending to the issuer, which may be a government, municipality, or corporation. In return, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal, also known as face value or par value of the bond, when it "matures," or comes due after a set period of time. Investors buy bonds because, bonds provide a predictable income stream. Bonds typically pay interest twice a year. If the bonds are held to maturity, bondholders get back the entire principal, so bonds are a way to preserve capital while investing. So are bonds a good investment now with the potential Fed hike coming up in December. If the interest rate hike does happen and you're an individual investor looking to invest in bonds there are some things to keep in mind like the bond rate, bond prices, bond yield and interest rate predictions. It also depends on the type of bond you invest in. There are many different types of bonds from U.S. Government bonds, Corporate bonds to Treasury bonds to Foreign bonds to Municipal bonds and so much more. Not all bonds are the same. Bonds can be a comparatively safe investment, when compared to Stocks and Mutual Funds. The higher the credit quality of the issuer, the safer the Bond is. To get more in depth information on what bonds are and whether bonds are a good investment click on the pictures below to read the articles.