Investing in Bonds

The main reason to invest in bonds is capital reserve. Investing in bonds isn’t a risky type of investment, it’s almost sure that the investor is going to get his money.

Bonds are a form of debts. Governments, city or local governments and corporations can issue bonds for individual investors or everyone else, who can lend them money. The reason for a bond issue is to collect capital for an investment. Bonds have a lifetime, which can range from several years to a few decades. The payed interest depends on the type of the bond.

The main types of bonds:

1. high yield bonds : these bonds pay more interest, but they consist a higher risk factor. The credit rating agencies (Standard and Poor’s, Moody’s …) rate the issuer of these securities low, that’s why these bonds pay more interest.

2. fixed rate bonds: these coupons have a fixed rate throughtout their lifetime.

3. floating rate notes: these notes depend on the LIBOR or Euribor. For example, a floating rate note pays LIBOR + 0,1 % interest. These notes are reseted every 3 months, because LIBOR is changing.