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Tips for investing in corporate bonds

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When it comes to investing the most common word you probably here is "stock."Bonds however don't get as much publicity as stocks do, but they can often offer a nice alternative investment for the right individual.And they are often times considered to be a smarter investment than stocks in certain situations.This article will give you a better idea of what corporate bond investments are and some helpful tips for investing in corporate bonds.

What are corporate Bonds?
Corporate bonds are debt obligations or in slang term IOU's.They are issued by private and public corporations and can be anywhere between $1000 to $5000.The money that is raised by companies for selling bonds can be used for several purposes; building facilities, equipment, or expansion.Here's how it works, when you buy a corporate bond you are basically lending money to the company that issued it.In return for your generous loan, the company agrees to pay back the money at a specific rate of interest on a specific maturity date.This does not however give you any type of ownership in the company.

How is the corporate bond market?
The nice thing about corporate bonds is that the market is fairly large and extremely liquid.Most corporate bonds trade in the over-the-counter market.This market is made up of a bond of dealers and brokers from various parts of the country that trade debt securities either by phone, or electronically.

Here are some helpful tips for investing in corporate bonds

  1. If you decide that corporate bonds are a good option for you make sure that you deal with a brokerage firm; conventional of on the web.Make sure the firm offers a variety of company owned or controlled bonds that you can buy from their daily generated list at a net price.This is much easier than just chasing open bonds on the market.

  2. The New York Stock Exchange can provide you with a list of major public companies that sell corporate bonds.Avoid the municipal bond market.

  3. Only select corporate bonds that will mature within two to five years.Although you will probably receive a lower interest rate you have protected yourself from fluctuation due to daily changing interest rates.You can also avoid paying a commission to a stock broker because you have such a short period of maturity.

  4. Stay away from bond funds.No matter what you hear or what anyone tells you there is not a significant diversification benefit over a fund and small purchase bonds.Truly the only reason a stock broker or brokerage firm will push you towards a fund is because they gain a far greater commission per dollar with that type of investment.

  5. Look for corporate bonds that can be bought on discount.

  6. Make sure you evaluate the worth of the corporation you are purchasing your bond from.Do they show a regular profit?Do their assets exceed their liabilities?Any problems? Etc.Make sure that you are thorough in your quest for somewhere to invest.A hasty or poor decision can cost you a lot of money.

  7. Always review the securities you hold within your corporate bond to make sure that your outlined criteria is being met.If you are no longer satisfied with its activity then get rid of it.

Corporate bonds can be a great investment if you are careful with what and where you invest your money.Use these tips for investing in corporate bonds to help you make a better and smarter decision about where to put your money.


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