Select Page

Bonds

Fullwidth Section Subtitle

Sponsored Content

Bonds Summary

A bond is an investment instrument you purchase signifying a loan. A bond issuer has chosen to borrow money from a bond purchaser. By purchasing bonds, you have chosen to lend the issuer money. The bond itself is the contract which says you will be repaid on maturity for the loan’s principal along with interest paid on specific dates. Bonds are usually, but not always, fixed income securities which pay a specified payment at specific intervals of time. They differ from shares primarily by not providing you with control or ownership rights.

Bond instruments come in a wide variety of possible flavors. Each kind of bond provides you payments in return for debt, but they all function differently. There are two splits for bonds owned. The first split divides by the issuer. Is your bond initially sold by a sovereign government, a city, or a corporate? Most bonds fit into a very specific subcategory based on their issuer. For example, corporate releases divide into debentures, convertible, callable, and high yield bonds. Government bonds split principally into Nominal and Inflationary adjusting flavors. Afterwards, they primarily divide by the length of their term.

You don’t have to buy bonds only on an individual basis. Bond funds purchase hundreds of bonds to create a portfolio. Over the years, their returns become your returns. Their portfolios are far cheaper on entry than it would cost to buy hundreds of personally held bonds. They’re also far easier to maintain, since purchases and sales are decided by a professional management team.

Bonds

Major Economic Analysis

Economic Summaries
Statistical Currency Projections
Large Speculator Sentiment
Technical Signals Lists

American Equity Markets

Economic Performance Index
US Dollar Projections
Market Sentiment Tracking
Sector Strength Tracking
Consensus Estimate Rankings
Fundamental Firm Analysis

Bond Basics

A bond is an investment instrument you purchase signifying a loan. A bond issuer has chosen to borrow money from a bond purchaser, with no idea who else will eventually buy the bond. By purchasing bonds, you become the bond purchaser who has chosen to lend the issuer money.

Why Buy Bonds?

Why Buy Bonds?

You should include bonds within your portfolio for many differing reasons. Bonds create profile stability, exceed cash returns, have a variety of choices and flavors, and diversify the risks of a portfolio.Bonds enhance the stability of your portfolio. Equities move positively or negatively based on analyst estimations, economic reports, Federal Reserve rate changes, opinions, financial statements, and corporate news on a day to day basis.

Read

Bonds & Gearing

Bonds & Gearing

Bonds are issued for the exact same reason shares are issued: to increase funding for an organization. Bonds help compose the debt categorization of Gearing. Besides debt, the other primary source of gearing is equity. Unlike shares, bonds are issued by a substantially wider selection of organizations. Bonds can be issued by cities, states, provinces, governments, government agencies, and firms of varying sizes. Organizations which cannot issue shares utilize bonds to raise money from the public. Firms can issue both shares and bonds to raise financing.

Read

Bond Issuer

Bond Issuer

Bonds can be issued by an extremely wide array of sources. These sources determine their issuing categorization and assist in determinations of their risk. The short list of bond issuer categories includes Sovereigns, Semi-Sovereigns, Municipals, Agencies, Private Entities, and Corporations.

Read

Bond Underwriting

Bond Underwriting

Bonds must be issued to be sold, and bond underwriting is a part of that process. The bond underwriting process will change based on the bond’s category, region, and regional legal regulations. The process in many nations is highly similar and can be simplified. If you are purchasing first-time issues investigate the national regulations of the issuer’s home country. Any time you invest in foreign bonds, especially original issues, you will benefit from becoming familiar with that nation’s issuing regulations. The process is normally similar despite borders but unknown differences may cause big headaches.

Read

Bond Properties

Every bond has specific properties that appear depending on their type. Any characteristics applied will appear in their contract. These determine the actual structure of the bond. There basic properties that occur within every bond. These are the Indenture, Price, Yield, Duration, Credit Rating, and Enhancements.

Bond Indenture

Bond Indenture

The Bond Indenture is the contract made between the issuer and the bondholder or bond owner. This contract includes the maturity, face value, and par value. It may include other options and enhancements for the bond. Based on these factors the Bond Indenture indicates the type of bond, of which there are many. The contract between the two parties must be filled, or the company will be found in default or in bankruptcy.

Read

Bond Prices

Bond Prices

When reading the prices of bonds, you may notice that prices are listed differently than other investment instruments. Instead of being listed in dollar terms, bonds are listed in percentages of the original price at issue. If a bond is listed as 100, it is currently 100% of its value at issue. Any listing above or below 100 reflects that value in percentage terms.

Read

Bond Yield

Bond Yield

The Bond Yield shows the interest actually received or anticipated by investors. Current Bond Yield shows the rate actually gained at the current price. Calculating the current bond yield requires the price for the bond, which may not be easy to find depending on the bond.

Read

Yield Curves

Yield Curves

The yield curve shows rates of borrowing in relation to periods of time. It specifically shows differences in the short term and long term interest rates. There are multiple yield curves, but government bonds are the most closely tracked since they set interest rate trends. They are the basis of “risk-free” investment rates for a local market. The Yield Curve itself has a vertical yield axis, a horizontal time axis, and a curve displaying rates as they relate to time. Rates generally increase over the length of the term.

Read

Bond Duration

Bond Duration

Bond duration is the amount of time it will take the bond to deliver half of the total payment back to the investor. The bond duration is weighted, or adjusted to factor in the time value of money. Since cash received soon can quickly be invested for returns, payments in the future are worth less than payments received soon or cash held today.

Read

Bond Credit Rating

Bond Credit Rating

In order to be listed for trading, issuers must acquire a rating from credit rating agencies. These agencies assign a rating based on the ability of the issuer to make repayments on their bonds. The ratings mostly focus on financial strength, but also include the usage of funds, the regulatory or political environment, and potential changes to economic situations.

Read

Bond Enhancements

Bond Enhancements

Bonds can have additives on them known as “Bond Enhancements”. Bond Enhancements place additional controls on the issuer and limit their potential actions. They often operate in your benefit, but you should always ensure that there are no surprises within the bond contracts. The three main bond enhancements are Covenants, Insurance, and Sinking Funds.

Read

Bond Types

There are an extremely large variety of bonds. Each type of bond has a contractual property which defines them, and some of them can even overlap. It should be noted that each type of bond is not always fit for your investment. Whether or not a bond should be purchased depends on your personal financial situation. For example, if you are trying to build a bond portfolio which provides you with monthly financial income, you should not be investing in zero coupon bonds. Those bonds pay interest and face value only at maturity, negating your purpose for investment. This is one of many potential personal situations which limit your investment selection.

Bond Risks

Bonds come attached to several different sets of risks. There are six specific major risks for bondholders.

Credit Risk

Credit Risk

The credit risk is the risk of a firm defaulting on their debt. This is also known as default risk, the risk of a borrower failing to repay the debt. This risk is deeply associated with the financial stability of the issuer. The lowest credit risk is a high financial stability, where it is close to impossible to default. The highest credit risk is immediately before bankruptcy or default. A firm declaring bankruptcy is the highest default chance.

Read

Inflation Risk

Inflation Risk

All low yield instruments have a chance to be outpaced by inflation. The lower the return, the higher the odds. Inflation reduces the power of money to purchase products, which also reduces the value of new money earned. If inflation matches returns, you will retain the same purchasing power. If inflation exceeds your returns your ability to buy an equal set of goods will slowly erode.

Read

Interest Rate Risk

Interest Rate Risk

Interest rate risk is the possibility that interest rates will increase. This occurs when a central bank with jurisdiction over the currency of your bond’s issue raises rates. The price of a bond moves in opposition to the interest rate. If you are holding a fixed rate bond and the central bank moves the interest rate downward, your bond’s market value will increase. If you have a bond at the current rate and the central bank moves the interest rate upward, your bond’s market value will decrease.

Read

Reinvestment Risk

Reinvestment Risk

Reinvestment risk is the danger of purchasing new bonds at lower yields than previously received. This occurs when a central bank has lowered interest rates after you’ve purchased a bond issued in a currency affected by a rate change. Your bond will pay higher amounts of interest than the newly issued bonds but you will be forced to reinvest your payments at the lower interest rate.

Read

Call Risk

Call Risk

Issuers can call their bonds if the bonds have a call provision. The issuing firm essentially cancels their agreement to pay interest and gives you the par value and a small premium instead. The interest between the call and maturity is lost forever, which reduces total return. You should always watch for, and avoid, bonds with call provisions. Callable bonds pay higher rates versus regular bonds as “compensation” before and after their call date. This actually makes them more likely to be called to save money in the future.

Read

Downgrade Risk

Downgrade Risk

Downgrade Risk is the risk a firm’s credit rating will fall after you’ve purchased their bonds. This lowers the value of any debt obligation issued at higher credit ratings. Bonds at lower ratings incur more risk and must pay a premium exceeding greater levels. They will be bypassed in the market if they don’t pay higher interest payments than lower risk bonds. Bonds issued before a downgrade will pay less interest than freshly issued debt obligations while having identical amounts of risk. Investors will skip elder bonds for those issued at the new credit rating, which provide higher interest rates to compensate for the same risk.

Read

Bonds & Price

Bonds are priced differently than equity vehicles and investment funds. Bond instruments are not listed in currency terms, except at issue.

Pricings & Spreads

Pricings

When reading the prices of bonds, you may notice that prices are listed differently than other investment instruments. Instead of being listed in dollar terms, bonds are listed in percentages of the original price at issue. If a bond is listed as 100, it is currently 100% of its value at issue. Any listing above or below 100 reflects that value in percentage terms.

Read

Bonds & Interest Rates

Bonds & Interest Rates

Interest Rates are the reward for lending and have two differing functions in debt obligations. Both divisions of interest reward you for being willing to lend money to financial firms and institutions. The first function compensates you for the inflationary loss you would suffer if you lent money to others. If you loan $600 now and receive $600 back in 10 years, your money would purchase more goods today than in the future. Interest payments mitigate pricing power loss.

Read

Bond Markets

The bond markets split into primary and secondary markets. They are directly sold by issuing organizations and governments in the primary to original investors. After the initial sale, they may be purchased or sold in the secondary bond market via brokers or traded on indexes. Both primary and secondary bond markets are international and most trading boundaries have disappeared over time.

Primary & Secondary

Primary & Secondary

Bond markets divide into primary and secondary markets. The categorization changes depending on who’s selling the bond. Only initial issuers sell in primary market transactions. Any bond holder can sell in the secondary market.

Read

Bond Indexes

Bond Indexes

Bond Indexes track the performance of bonds and bond portfolios. You can easily compare your own holdings to the risk and return of other bonds within the index, or against the index as a whole. This gives you a guideline to compare your earnings for your own bonds by tracking the performance of bonds and bond portfolios. You can also compare the returns of a bond portfolio manager against a bond index to analyze their investment strategy. This gives an easy measure to determine if their performance exceeds the market.

Read

Bond Brokers

Bond Brokers

Market interactions become easier if you have a substantially knowledgeable bond broker. A good broker will be explicitly trained in the bond markets. A broker specifically educated in bonds can pass on substantial amounts of useful knowledge a general broker will not know. They should quite literally be able to train you in their specific area of capability. You should not rely on them for advice outside of their specialization. They are your bond broker only for bonds. They should also be willing to educate you on any issue regardless of direct purchasing. They should be useful for you as an investor, and not simply as a provider of investments. Even if you are buying bonds elsewhere your broker should still be willing and able to assist purchasing decisions.

Read

FINRA TRACE System

FINRA TRACE System

Bonds, depending on the regularity of trading, can be plagued with pricing problems arising from problems obtaining recent or accurate trading information. This may be due to a lack of trading. Some bonds are issued and never resold, resulting in difficulties determining accurate prices. Bond sales not being publicly recorded is also a potential issue. This occurs if a buyer, seller, and middleman are aware of the final price, but everyone else is not. Market prices will not be accurate if either event possibility occurs.

Read

Foreign Bond Markets

Foreign Bond Markets

Bond markets are international. Over years the restrictions which reduced foreign investment slowly disappeared, and investors can easily purchase bonds from markets beyond their own. There are several qualifications that are used to denote bonds which are not from your home country.

Read

Bond Strategy

Investing in individual bonds requires carefully approaching multiple factors. Before making a specific purchase you should consider how you are going to handle each of these factors. Learning how to control them is the key to your bond market success.

Bond Costs & Bond Markups

Bond Costs & Bond Markups

Bond Costs and Bond Markups is a factor that can strongly reduce your returns if not considered carefully. You should always seek to reduce bond costs. The higher the cost or broker markup of your bonds the lower the return received. You should always consider the amount of time it takes fees, commissions, markups, and spreads to be exceeded by interest return. Each time you pay Bond trading costs they absorb your returns, which means more time lost in interest. Anytime you pay high expenses, you increase the amount of interest you need to reach your financial goals. It’s necessary you reduce bond costs and bond markups.

Read

Bond Taxation

Bond Taxation

Understanding bond taxation is crucial to the organization of your portfolio. Bonds without tax advantages will inherit them from tax reduced accounts, which typically are retirement-oriented. Adding bonds with inherent tax advantages waste space since taxes are already reduced and the benefits usually do not stack. Keep bonds with taxation benefits in your normally taxed portfolios. Save tax-advantaged accounts for bonds and investments without tax-exclusions or advantages. As an example, municipal bonds within the United States are excluded from federal taxation and should not be placed in tax-advantaged accounts.

Read

Timing & Control

Timing & Control

One of the most important requirements to long-term bond investing success is the ability to time and control your investments. Purchasing bonds immediately before a rise in bond rates will reduce the value of a bond. Purchasing bonds immediately before a decrease in rates will raise the value of a bond. Since you can’t ever control when rates will rise or fall, you can only attempt to preempt the central banks setting the rates of the bonds. Watching economic indicators can hint at rate rises or falls, but surprises have happened before and will happen again.

Read

Bond Ladders

Bond Ladders

Bond Ladders diversify your maturity rates over time. The change comes from the timing differences between purchasing large amounts of bonds at once and slowly investing in bonds over time. If you purchase single bonds, you may have a large amount of maturities coming due at once, which opens you to larger amounts of reinvestment risk. To avoid the risk of being forced to move money into lower interest rates than before, structure your bond maturities so you never have substantial amounts of bonds coming due at one time.

Read

Bond Funds

Bond Funds

Bond investors have two specific pursuable routes. Investors can purchase single bonds by themselves or enter bond funds which purchase bonds, which consist of hundreds or thousands of bonds built into a single portfolio. Each path has its advantages and its own disadvantages.

Read

Repurchasing Agreements

Repurchasing Agreements

Repurchasing agreements are contracts which temporarily exchange cash for securities. These are loans where securities serve as collateral until payment is made, and the bonds are then delivered back to the original bondholder.

Read

Government Bonds

Sovereign Bonds, also known as Government Bonds, are issued by governments to fund projects and are repaid with taxpayer dollars. Any nation state can issue its own sovereign bonds if needed.

Nominal Sovereign Bonds do not adjust for inflation over the bond’s term. Inflation Adjusted Bonds attempt to mitigate one of the biggest problems experienced while investing in bonds.

Government Bond Basics

Government Bond Basics

Sovereign Bonds, also known as Government Bonds, are issued by governments to fund projects and are repaid with taxpayer dollars. Any nation state can issue its own sovereign bonds if needed. Sovereign bonds are normally covered with the “full faith and credit” of the particular government issuing the bond. This statement means the government must take full advantage of its ability to issue currency and tax its population in order to pay their debts. Some sovereign states cannot issue currency. Eurozone Nations, which rely on Euros but cannot print currency since they lack control of the European Central Bank, are an example. To encourage investors to purchase bonds, some governments issue bonds which are immune to provincial, state, or local taxation. Check with your national government to ensure your government’s bonds allow taxation immunity from regional, provincial, or municipal taxes.

Read

American Nominal Savings Bonds

American Nominal Savings Bonds

Nominal Sovereign Bonds do not adjust for inflation over the bond’s term. You will receive the stated par value at maturity, as well as the interest from bonds over the bond’s term at a fixed rate. Depending on the government, the original issue is purchased via direct sale, or via an auction.

Read

American Treasury Bills

American Treasury Bills

Nominal Sovereign Bonds do not adjust for inflation over the bond’s term. You will receive the stated par value at maturity, as well as the interest from bonds over the bond’s term at a fixed rate. Depending on the government, the original issue is purchased via direct sale, or via an auction.

Read

American Treasury Notes

American Treasury Notes

Nominal Sovereign Bonds do not adjust for inflation over the bond’s term. You will receive the stated par value at maturity, as well as the interest from bonds over the bond’s term at a fixed rate. Depending on the government, the original issue is purchased via direct sale, or via an auction.

Read

Inflationary Bond Basics

Inflationary Bond Basics

Inflation Adjusted Bonds attempt to mitigate one of the biggest problems experienced while investing in bonds. Inflation, or purchasing power loss, can easily ruin the benefits of an investor’s portfolio. Nominal bonds suffer during periods of high inflation; in inflation adjusted terms they may deliver a purchasing power loss. Bonds which adjust to the rate of inflation adjust either the interest or the principal to cancel the eroding purchasing power. These keep track with the inflation rate, reducing your loss of purchasing power.

Read

American Inflationary Savings Bonds

American Inflationary Savings Bonds

Inflationary Savings Bonds, also known as I-Bonds or I-series Savings Bonds, provide interest while hedging against inflation. These bonds are registered to your social security number. Just like nominal savings bonds they cannot be traded or transferred, no secondary market for them exists. I-Bonds also have a purchase limit. You can purchase a maximum of $10,000 of bonds electronically per calendar year, and an additional $5,000 annually using a tax refund for paper bonds. Paper bonds can only be purchased with tax refunds and are also registered to your name. You can alternatively register it to your trust, estate, and some businesses.

Read

American Treasury Inflation-Protected Securities

American Treasury Inflation-Protected Securities

Treasury Inflation-Protected Securities are commonly referred to as “TIPS” in shorthand. These are secondary market trade-able, which is different than Inflationary Savings Bonds. TIPS are not registered to the purchaser via social security number or any other means and can be transferred from seller to buyer. You can purchase and sell them in the secondary security markets. TIPS are issued via banks, brokers, and the US treasury.

Read

Municipal Bonds

Cities, much like nations, issue bonds to support their expansions and requirements. They are known as Municipal bonds, issued to increase city funding.

Municipal Bond Basics

Municipal Bond Basics

Cities, much like nations, issue bonds to support their expansions and requirements. These bonds are known as Municipal bonds, issued to increase city funding. For American owners, these bonds have a single important function. They are always excluded from one level of taxation, and possibly two or more. While most bonds’ interest payments are subject to federal government income tax rates, Municipal bonds are tax exempt. This is typically their one redeeming factor. They pay lower interest rates due to this tax exemption, but most of that rate is kept by the purchaser.

Read

Revenue Sources

Revenue Sources

Municipal bond issuers have less revenue privileges in comparison to sovereign issuers. Sovereigns can print their own currency to pay their bonds, and or pay with tax revenue. Municipal bond issuers cannot print their own money, so they rely on one of two ways to repay their bonds.

Read

Credit Ratings

Credit Ratings

Bond purchasers should carefully select issuers who can repay their debts since Municipal bond issuers cannot print currency. Issuers usually can only repay bonds via tax or project revenue. You must pay careful attention to municipal bond issuer’s ratings.

Read

Municipal Returns

Municipal Returns

Municipal bonds are fixed interest rate bonds. The price of these bonds rises and falls in relation to the interest rate available in the market. If the rate rises and exceeds your bond, the value will drop. If the rate falls, and your bond’s rate is higher, the will become more valuable. This only matters if you want to sell your bond in the secondary market. If you are holding until maturity, this is meaningless.

Read

Agency Bonds

Agency bonds are issued by government affiliated corporations and government subsections. These agencies are created by the government to serve specific functions for the public.

Agency Bond Basics

Agency Bond Basics

Agency bonds are issued by government-affiliated corporations and government subsections. A “government-affiliated corporation” is created by the government to serve specific functions for the public. They may provide mortgages to homeowners, assist small business, or provide loans to citizens. Some of them even publicly issue shares for investor purchases on share exchanges. It’s important to note that these bonds are not treasury bonds. While they share some similarities, they are not the same.

Read

Agency Bond Considerations

Agency Bond Considerations

If you are investing heavily in government bonds, you don’t particularly need agency bonds. They are highly similar, and the only reason to substitute is for slightly higher yields. Agency bonds are not really swappable for government bonds in a portfolio, since they do not automatically get tax exemptions. The primary difference comes in taxation.

Read

Agency Bond Rates

Agency Bond Rates

Agency bond rates are typically fixed, paying a set interest rate per year. Most agency bonds follow a fixed straight debenture format, paying a specific amount of interest and then returning the principal to the investor at maturity. Other fixed interest agency bonds are zero-coupon bonds. They sell initially at a discount and pay both principal and interest at maturity. Most of the agency bonds which are zero-coupon bonds are short term holdings.

Read

Corporate Bonds

Corporations issue bonds in order to borrow financial capital. Issuing bonds and repaying the debt over long periods of time can be more appropriate for firms who don’t want to lose equity.

Corporate Bonds Basics

Corporate Bonds Basics

Corporations issue bonds in order to borrow financial capital. Issuing bonds and repaying the debt over long periods of time can be more appropriate for firms who don’t want to lose equity. Instead of reducing shareholder equity percentages, they simply sell bonds and use this funding to expand. The firm also gets the privilege of customizing the bonds to their needs, as long as they can sell.

Read

Callable Corporates

Callable Corporates

Certain corporate bonds can be called. You will be given your principal and the interest payment currently due, but lose all future potential interest. If you purchase callable corporate bonds, you should operate on the assumption that they will be called at the first available call date.

Read

High Yield Bonds

High Yield Bonds

Placeholder Text, followed by shortcode with 2 columns, each one having title, text, button in the column and a link to anticipated page section. If using 2 columns, delete button and use shortcode for two column section. Otherwise leave alone.

Read

Analyzing Bond Issuers

Analyzing Bond Issuers

While investing in equities, your analysis and valuation need to take a wide array of factors into consideration. Equity investor’s essential goal is determining how quickly the company’s growth rate is for the long term, and relating that information to the firm’s value. The stability of the firm is also taken into account. When analyzing bond issuers, you essentially care solely about the firm’s financial stability. You don’t care about the growth rate beyond its ability to ensure the firm will repay you. Will the firm still exist when the maturity date comes for the bonds? Are there any specific events which will result in your firm not being able to make interest payments or principle repayments? You are essentially playing the role of a bank lender, making the same judgments from the same position.

Read

Convertible Bonds

Convertible Bonds

Convertible bonds can be transformed into equities. A fixed ratio is set at the bond’s issue, and the bond can be converted into the fixed amount of shares. Purchase gives you the option to convert, but cannot be forced to do so. This gives you a lot of control. If the share prices rise you can convert them and cash in by selling or holding during the climb. If the shares fail you can retain the safety of bond ownership, receiving required interest payments and principle repayment. This combination seems great, but there are a few issues.

Read

Revertible Bonds

Revertible Bonds

A revertible bond, also known as a reverse convertible or reversible, operates in a similar fashion to a convertible bond. A convertible bond is changed at your discretion if the market price is higher than conversion price. A revertible bond automatically becomes a fixed ratio of stock if the market price falls below the conversion price. This price is set below the market price at issue.

Read

Developed Foreign Bonds

Markets can be classified into domestic and foreign. The domestic market is where you live, and a foreign market is any market beyond your borders. The economic classifications are dependent on development. The economically “finished” markets are developed market. These nations consist primarily of first world nations like Japan, Canada, America, France, Switzerland, Germany, and England. The underdeveloped market is emerging market. These are “second world” and “third world” nations with growing economic development.

Emerging Foreign Bonds

Emerging market bonds are highly risky compared to stable first world equivalents. These nations are nowhere near as developed as the first world nations, so they are far more vulnerable to economic shock. The issues of sovereigns from the second or third world are highly volatile and more likely to default than first world issues.

Bond Funds

A bond fund is a mutual or closed end fund which specializes in fixed income securities. These funds invest in specific types of bonds, composing a portfolio from bond selections within a specific category.

Bond Fund Basics

Bond Fund Basics

A bond fund is a mutual or closed end fund which specializes in fixed income securities. These funds construct a portfolio from selected bonds and sell you a percentage of ownership. The selections are based on specific bond classifications, maturity, credit risk, or other specific characteristics. The investments specifications purchased with your money will be specified in fund’s prospectus.

Read

Diversification

Diversification

Bond funds are instant diversification to an investor within the bond markets. Instead of buying two or three bonds with a few thousand dollars, you purchase a portfolio containing hundreds of bonds. You can easily use bond funds to diversify the market location, maturity, or bond instruments used by the fund. To diversify by location simply choose a bond fund which targets only your domestic region or nation, then choose bond funds which target foreign bond markets with a low correlation to your own.

Read

Fund Structures

Fund Structures

Bond Funds come in almost as many structures as mutual funds. The construction of the security basket you are purchasing determines how vehicles are selected. It also determines how profits are delivered and the value of portfolios are generated.

Read

Fund Fees

Fund Fees

Your return from funds is partially based on how you pay, and how much you pay for them. Your costs eliminate portions of your returns, so purchasing and holding a bond fund with high expenses won’t necessarily help you out. Bond funds, like mutual funds, have many potential fees structures. The problem is that bond funds are composed of bonds, which are low return vehicles. Expenses spent on commissions and fees cost higher percentages of your returns than they would with equity-based vehicles. To get a decent return, you must hold bond funds even longer than equity-based mutual funds. There are four basic fee types that are charged by funds: Operating Expenses, 12b-1 Expenses, Front-End Loads, and Back-End Loads.

Read

Bond Fund Documentation

Bond Fund Documentation

American Bond Funds are required to create three specific types of bond fund documentation for investors. These Bond fund documents are the fund’s prospectus, annual financial report, and the Statement of Additional Information. A bond fund’s prospectus informs investors of the fund’s purpose, risks, and procedures. Most importantly, the operational expenses, front-end loads, back-end loads, and 12b-1 fees charged by the fund are listed within the fund’s prospectus.

Read

Controlling Bond Fund Risks

Controlling Bond Fund Risks

The bond fund risk exposure changes based on which bond funds you select. This remains equally true for bond funds. Bond funds composed of bonds vulnerable to a particular weakness will carry those weaknesses in the fund. If the bond type you are choosing has a particular sensitivity to default risk, interest rate changes, inflation risk, currency exchange risk, or any other risk, a fund built from those bonds will also carry that sensitivity. A skilled manager will have control over those risks, or will be able to mitigate them, but sensitivity will remain at some level. This is something you should be aware of as an investor.

Read

Time Based Bond Funds

Time-Based Bond Funds

Many bond funds are categorized by their length, in addition to their target sector or bond type. Some of these are corporate bond funds, investing only in bonds released by corporations. Some invest in government bonds within a time frame, and others invest in agency, municipal or other bond types. For example, you will see titles such as “High-Yield Mid-Term Corporate”. This shows the targeted subtype, term, and bond categorization. If they don’t display a time frame but list the average duration or average time to maturity, this list will help you decipher the category.

Read

High Yield Bond Funds

High Yield Bond Funds

High-yield bond funds invest in bonds which offer high return in exchange for high risk. These vehicles are determined by their credit rating, with high yield instruments being rated below BBB or BAA. Credit ratings is based on a firm’s liquidity, profitability, cash flow, and existing debts. Their credit rating indicates these firms are moderately to highly likely to default.

Read

Tax Free Bond Funds

Tax-Free Bond Funds

Tax-free bond funds purchase bonds with tax exemptions under specific circumstances. When purchasing these bonds, they ensure that these conditions are met, providing tax-free income for the fund shareholders. These usually consist of American municipal bonds within the same state. A person buying a Florida municipal bond fund may receive tax exemption if they live in Miami, Florida and possibly federal level United States taxation. Depending on the state laws of Florida, they may receive tax freedom at the municipal, regional, and national level.

Read

Government Bond Funds

Government Bond Funds

Government bond funds use investor’s funds to purchase bonds issued by a specific sovereign government or group of governments. Government bonds can repay their issues using taxation, the printing of their own currency, or repayment using a stable foreign currency. The nation selected will be specified by the bond fund’s prospectus or investment objectives. Based on the selection, and your relation, a bond fund will be investing in your domestic nation or foreign nations. In either case, you should ensure that the person managing the government bond fund is both experienced and specializes in the target nation.

Read

International Economic Analysis:

  • Major Currency Economic Summaries
  • Performance of Major Imports and Exports
  • Mandates of Central Banks versus Expectations
  • Performance Indexes of Major Economies
  • Economically Correlated Currency Projections
  • Large Funds Currency Sentiment Readings
  • List of Technical Indicators to Look For
  • Occasional: Foregin Exchange Technicals Markups

American Markets Analysis:

  • Summaries of American Economic Structure
  • Performance of Major
  • Imports/Exports
  • Federal Reserve Mandate versus Expectations
  • Performance Indexes of U.S Economy
  • Economically Correlated U.S Dollar Projections
  • Large Trading Fund Index Sentiment Readings
  • Market Wide Earnings Versus Valuations
  • Fundamental Ranking of U.S Business Sectors
  • Best and Worst Future Consensus Estimates
  • Occasional: Firm Fundamental Strength Report
  • List of Technicals to Look for While Trading

Brokerages, Insurance Firms,
Financial & Trading Software.

Sponsored Content