Knowing Bonds

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Bonds are a safer area to invest your money in. You need to know many things about bonds before making an investment in them. A lack of knowledge leads to the purchase of bonds that are not suitable for you.

The date of maturity, par value, and coupon rate are to be considered seriously while purchasing a bond. .

Maturity date refers to the date on which the bond reaches its full value. You get back the original money invested along with the interest accumulated on this date.

The bond's par value is the amount that you are eligible to receive on the bond reaching its maturity date. You get back the initial investment on the date of its maturity. The local, state, and corporate governments' bond are subjected to get "called" even before their maturity date. Here, they return your invested money in full and also the interest earned. The Federal bonds do not have this characteristic.

Coupon rate refers to the interest that you receive on the bond reaching its maturity. This is given as a percentage and you must find out the exact figure by using other information.

Since the banks do not issue bonds, most people are unaware of the procedures of buying one. This could be done by approaching the broker or a stock broking firm to do the purchase on your behalf or you can seek the government's help. A stock broking firm/broker charges a commission for their service. You can select a broker who charges minimum commission.

Purchasing a bond directly through a Government used to be a difficult one. But now a day, a program by name Treasury Direct allows you to purchase the bonds and all the bonds you purchase like this are held in a single account. You also have easy access to it. This would erase a stock broking firm or a broker from the picture.

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