bondbasics - Bond Basics Tutorial...

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(Page 1 of 10) Copyright © 2008, Investopedia ULC - All rights reserved. Bond Basics Tutorial http://www.investopedia.com/university/bonds/ Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/contact.aspx Table of Contents 1) Bond Basics: Introduction 2) Bond Basics: What Are Bonds? 3) Bond Basics: Characteristics 4) Bond Basics: Yield, Price And Other Confusion 5) Bond Basics: Different Types Of Bonds 6) Bond Basics: How To Read A Bond Table 7) Bond Basics: How Do I Buy Bonds? 8) Bond Basics: Conclusion Introduction The first thing that comes to most people's minds when they think of investing is the stock market. After all, stocks are exciting. The swings in the market are scrutinized in the newspapers and even covered by local evening newscasts. Stories of investors gaining great wealth in the stock market are common. Bonds, on the other hand, don't have the same sex appeal. The lingo seems arcane and confusing to the average person. Plus, bonds are much more boring - especially during raging bull markets , when they seem to offer an insignificant return compared to stocks. However, all it takes is a bear market to remind investors of the virtues of a bond's safety and stability. In fact, for many investors it makes sense to have at least part of their portfolio invested in bonds. This tutorial will hopefully help you determine whether or not bonds are right for you. We'll introduce you to the fundamentals of what bonds are, the different types of bonds and their important characteristics, how they behave, how to purchase them, and more.
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Investopedia.com – Your Source For Investing Education. This tutorial can be found at: http://www.investopedia.com/university/bonds/ (Page 2 of 10) Copyright © 2008, Investopedia ULC - All rights reserved. (Before proceeding, it would be helpful for you to know a little about stocks. If you need a refresher, see our Stock Basics tutorial.) What Are Bonds? Have you ever borrowed money? Of course you have! Whether we hit our parents up for a few bucks to buy candy as children or asked the bank for a mortgage , most of us have borrowed money at some point in our lives. Just as people need money, so do companies and governments. A company needs funds to expand into new markets, while governments need money for everything from infrastructure to social programs. The problem large organizations run into is that they typically need far more money than the average bank can provide. The solution is to raise money by issuing bonds (or other debt instruments) to a public market . Thousands of investors then each lend a portion of the capital needed. Really, a bond is nothing more than a loan for which you are the lender. The organization that sells a bond is known as the issuer. You can think of a bond as an IOU given by a borrower (the issuer) to a lender (the investor). Of course, nobody would loan his or her hard-earned money for nothing. The
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This note was uploaded on 05/17/2010 for the course BUS 001 taught by Professor Gra during the Spring '99 term at American University in Cairo.

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bondbasics - Bond Basics Tutorial...

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