One way to invest for your retirement is to buy bonds. A lot of people swear by them and even financial advisers will recommend them to you. But if you’re a bit confused as to what bonds are the answer is pretty simple – it’s an IOU.

1. Investing In Bonds For Your Retirement
One way to invest for your retirement is to buy bonds. A lot of people swear by them
and even financial advisers will recommend them to you. But if you’re a bit confused as
to what bonds are the answer is pretty simple – it’s an IOU.
That’s pretty much it in a nutshell. Basically, you’re buying a financial instrument that
says so and so company is borrowing your money for a set time frame and in return
they will not only pay you back the money but will also pay you a set interest rate. That
means that instead of borrowing money from a bank the company is borrowing money
from you (and others like you).
It’s not just companies that do this – issue bonds. Local government entities and even
the federal government do the same things as well. It’s one way for them to raise money
for projects and such and for you it’s a way to earn money from your money.
If you invest in bonds you are assured of a return at a specified date. That being said
there are risks involved with bonds – yes, even with bonds. For one thing as interest
rates go up bond prices go down. That is to say if you’re buying bonds when interest
rates are high then you will be buying cheap.
However, if you are selling your bonds before their maturity date (maybe you need the
money) and the interest rates are high you will be forced to sell the bond low because
no one will buy a low interest bond for such a high price which means you may
potentially lose money on it.
Bankruptcy is also another risk – that is to say the company that offers the bonds has
filed for bankruptcy. If this happens they may not be able to pay the bond so basically
you will be left with nothing but a piece of paper. Government bonds are better in this
regard if you had to choose one.
Know more about bonds from Deborah Koval.