Savings & Investing
The Beauty of Bonds | The Beauty of Bonds |
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In general, investing in bonds is safer than investing in stocks because if a company goes belly-up, bondholders are ahead of stock share-holders in line to get paid. Bonds also offer more predictable returns than stocks because most bonds make regular interest payments to the bond-holders. Lastly, it has been proven that having some exposure to bonds in your overall Portfolio does not decrease your long-term returns but does decrease your overall risk exposure. To calculate what percentage of your Portfolio should be invested in bonds, most financial specialists recommend subtracting your age from 120. For example, if you are 27, 120 – 27 = 93. This means you should have around 93% invested in stocks and 7% in bonds. Much like stocks, bonds come in many shapes and sizes. There are government bonds, corporate bonds, municipal bonds (a Dash favourite) and junk-bonds that each give the investor a little different flavor. It may be easier to get your bond exposure through a bond mutual fund and many mutual fund shops offer low cost bond funds, including PIMCO who is regarded as an authority on bonds. Safety, consistency, added Diversification, if that’s not sexy, than what is?
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