subject: Investments Bonds To Purchase On How To Build Wealth [print this page] There are several kinds of investment bonds to purchase on how to build wealth. Each investment bond is unique, with their different features and aspects. If you want to increase your wealth by investing in bonds, here are the most common investment bonds available in the market:
- Corporate bonds
Corporate bonds are issued by huge corporations, public and private institutions.
- Secured bonds
Secured bonds are supported by specific assets like mortgages and investors accounts.
- Unsecured bonds
Unsecured bonds are also called debentures. Unsecured bonds are the most common type of investment bonds. They sound risky, but are actually not.
The investor risk is lower as the issuer's credit quality increases. Unsecured bonds are issued by private institutions and credit corporations, highly rated rather than secured, and are asset backed investment bonds.
- Government bonds
Government bonds have a maturity period for as brief as a year to as long as 20 years. These government bonds are being issued by the country's monetary authority.
- High yield bonds
High yield bonds, as the name suggests, are bonds that pay out high interest rates to their investors. High yield bonds are only issued when the bond's grades are low, such as companies that have fallen on poor economic times. High yield bonds may pay out huge checks, but are more precarious than investment graded bonds
- Callable bonds
Callable bonds are the riskiest type of bonds that has the highest rate of return. The issuer has the right to call back the bond at any time and repay the debt before it reaches maturity. This typically happens if the interest rates fluctuate.
- Convertible bonds
Convertible bonds are hybrid investments containing stocks and bonds. Once the interest rate rises, the bond's value decreases. If the bond's value decreases, however, the investor can convert it to common stock. This type of bond is perfect for investors who hate risk, and seek a stable and regular income with security against falling share prices.
- Floating rate bonds
Floating rate bonds or name floaters have interest rates that are periodically adjusted based on the market's current interest rates.
- Zero coupon bonds
Zero coupon bonds are often sold at a discounted price, where the coupon interest is accrued and paid out in a lump sum at the time of maturity.
The secret on how to build wealth is by choosing your investment bonds wisely. You should choose your investment based on the bond ratings. Not all bonds are created equal some are strong, some need high tolerance of risk while some are completely safe but offers a low payout. The highest possible rating is AAA, to C, or on some cases lower than C.
AAA bonds are of the best quality; so they carry the least amount of risk and thus pay out the least amount of reward. They are very secure and protected so you're sure to get paid.
BAA bonds are of medium grade that are not as highly protected, nor does it provide a high return. B bonds are more speculative with high investment risk but provide the highest return.
by: Dan Cavalli
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