Bond investing

Young investors often do not bother with bond investing as the returns are quite minimal and they are thought of as safe investments for individuals that do not like risk. When you get close to retirement, you tend to reduce your risk when you invest and you look for safer investments that you know will provide you with a decent return. While most investment advisors don't recommend bond investing for younger investors, there are a couple reasons why you should consider investing in bonds.

Reason # 1 - Stock Market Crashes
As we have witnesses a poor economy over the past couple of years, we have been able to learn that our investments are not always safe. The money you work hard for and put away for retirement can be done in an instant. If you put all your money into the stock market and you did not build a diversified investment portfolio, you can end up losing everything. So what is your best strategy? The best thing to do is invest in some smaller investments that will provide you with a steady return like bonds. Bonds help to protect your investment portfolio from too much risk because they do provide you with a guaranteed return and you know exactly when the term will be up.

Reason # 2 - Investing in good
When you purchase bonds, there are typically two type of bond options to choose from, government bonds or municipal bonds. Investing in the government bonds allows you a sense of security as you know the government will always be in tact so you know you will get your investment back plus some interest. When you invest in municipal bonds, you are investing in community projects and other things that will make your living environment better. As you invest your money into a bond, you are essentially becoming a bank and lending your money to be used to build new structures or other things. The bond can be short-term, mid-term, or long-term. When you invest in long-term bonds, you will receive a higher return on interest. Long-term bonds will last longer than 10 years whereas the other bonds are generally less than 5 years.

Reason # 3 - You know you will make money
Unlike high risk stock investing, you know you will make money with bonds. When you decide upon the maturation date and the interest amount, you can plan on that exact amount of money in a few years. Bonds provide you with security, which is much more than you can say for stocks, especially when the stock market crashes or takes a big hit.

Reason # 4 - Little risk
Since many people are worried about their investments due to the stock market issues that have plagued the country over the past couple of years, bonds are becoming popular. Bonds carry little risk. The high risk bonds tend to be those that are issued by companies that are looking for a way to expand. Since there is always a risk that the company will not become successful and will go under, you still run the risk of losing your money. However since the company is using bonds to finances their expansion, it is usually rare that you will end up losing your investment and you can gain higher interest rates, sometimes of 10% or more. However, most companies will build in an insurance protection for their investors that guarantees them their money if the company does fail.

Bonds provide you with peace of mind, which is a hard thing to find in a volatile world. If you don't have bonds in your portfolio, consider investing in some short-term, mid-term, and long-term bonds. This way you will be able to access some money in case there is an emergency and your stocks are all tied up.