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Bonds – An Overview of the Bonds Market


Business owners that lack the capital for expansion often turn to the bonds market for additional funds. These borrowers can be anybody from organizations to companies to our governments themselves. Investors, « DM Intl. » private individuals, banks, insurance companies and pension funds are all able to purchase bonds. Purchasing bonds are simply a means to offer a loan of sorts to the bond issuer. The reward, is interest.

The amount of interest one gets paid is determined entirely by the coupon. The coupon states the amount of interest the lender while regain over a set amount of months or years. Because the amount of interest being paid over time is known from the start, bonds also go by another name, fixed income rates.

So why are bonds so fascinating to some? What is the allure that the bond market has over a percentage of investors?

Bonds have a few very well-defined advantage over the stock or the forex trading market. When you buy a bond, you are investing in debt rather than equity. Debt-holders always get paid before shareholders should a crisis emerge. Also, the bond market is regularly a lot more consistent than other markets are. That is not to say there are no high risk bonds on the market. The risks are present. Rather, bonds offer a conservative investment opportunity. They pay-off is typically a lot less than other more exciting investments such as currency or stock trading but that is the trade-off for a good measure of security. Unfortunately, it is because of the conservative nature of the bonds market that a good number people choose to bypass bonds for other more lucrative areas of investment.

America is the principal issuer of bonds with slightly more than 40% of the intercontinental bond market while Japan comes in second. While not as significant as the stock or currency market, the bond market did see as much as 80 trillion trading for the year 2008.

Dabbling in the bonds market does have its downside. Big profits come only to those that purchase large quantities outside the means of most. There may not always be a buyer when you sell the bond. The forex market on the other hand enables us to sell with comparative ease. Finally, bonds cannot be traded on the market like stocks or currencies are.

Overall, bonds should still be seen as sound investment opportunities. For those of you that are looking to invest your hard earn money but are reluctant to undertake the high risks of a significant amount forms of investment, the bond market is great for you. The profits though, are in no way great unless a large amount is purchased.

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