Benefits of Investing into Bonds

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Benefit Of Investing Into Bonds

• Date 06/17/2022

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What is a Bond?

• In simple terms, a bond is loan from an investor
  to a borrower such as a company or government.
  The borrower uses the money to fund its
  operations, and the investor receives interest on
  the investment. The market value of a bond can
  change over time.
• A bond is a fixed-income instrument, which is one
  of the three main asset classes, or groups of
  similar investments, frequently used in
  investing.

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How do bonds work?

• Bonds work by paying back a regular amount to the
  investor, also known as a coupon rate, and are
  thus referred to as a type of fixed-income
  security. For example, a 10,000 bond with a
  10-year maturity date and a coupon rate of 5
  would pay 500 a year for a decade, after which
  the original 10,000 face value of the bond is
  paid back to the investor.

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Types of Bonds

• U.S. Treasury bonds - Treasury bonds are backed
  by the federal government and are considered one
  of the safest types of investments. The flip side
  of these bonds is their low interest rates.
• Corporate bonds - Companies can issue corporate
  bonds when they need to raise money.
• Municipal bonds - Municipal bonds, also called
  munis, are issued by states, cities, counties and
  other nonfederal government entities.

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• Gold Bonds Gold Bonds are substitute for
  holding physical gold Investors have to pay the
  issue price in cash and the bonds will be
  redeemed in cash on maturity.

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Benefits

• Bonds help diversify the investment portfolio. A
  well-established principle of personal finance is
  that one should never keep all the eggs in one
  basket and adding Bonds to your investment kitty
  helps you achieve just that. Through
  diversification, you can minimise your risks in
  the event your other investments start performing
  poorly. This is one of the primary benefits of
  Bonds.
• Compared to other instruments, Bonds offer
  assured returns. They are relatively inelastic to
  the market fluctuations.

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• Bonds are like a contract between the issuing
  company and the investors. The companies are
  bound to repay the interest and the principal
  amount of the Bond. Moreover, bondholders are
  considered creditors of the company and get
  preference for debt repayment if any bankruptcy
  proceeds against the issuing company.
• THANK YOU