Bonds is a fixed income security or financial instrument in a bond we lend money to government, corporations or institutions in return they promise us to pay interest and principal at a maturity time……..
Bonds is a fixed income security or financial instrument. in a bond we lend money to government, corporations or institutions in return they promise us to pay interest and principal at a maturity time.
If your friend need money $50 million, for whatever reason so your friend is decided to issue a bond. Bond is not more than IOU with serial number. People in suits to sound impressive they called debt to bonds or fixed income securities. A bond is always issued on face value (principal) like your friend issues bond of $1,000 of face value means your friend has to issue 50,000 bonds each selling for $1,000 par bond. Then he will go to the investors ask for invest their money but investors ask him what we get in return. He will give investors the return 7% p.a, if investors invest their money they will get $70 per year in half yearly basis. Here the benefit of bond is my friend need money he get money how much it need and also investors get return on their money.
In cases of friend relatives the chances of default is high but in real life we lend money to government, corporations or institutions, and the issuer of the bonds is regulated by the securities exchange and exchange commission because of this reasons bonds is one of the safest investment in a finance world.
In a most cases bonds is used for diversification purpose means if you have $100 for a easy calculation we take $100, you invest your money in stocks and the worth is $100 then that portfolio is to risky. Because we don’t know how much returns stocks will gives us but if we buy $30 or $40 dollars worth of bonds then our portfolio is become lower risky and we get some sense of predictability.
When investing your money in bonds, you must have a clear objective for doing so, why you are invest your money in bonds on some people portfolio they have too much bonds thats make their portfolio too safe, some have too few bonds thats make their portfolio very volatile. Now you are thinking my objective is making money this is not an objective. now we will start our discussion on objective or on developing investment game plan.
Focusing on objectives
Just assume you are the CEO of Google you are going office in minivan how it will look. lets imagine when you think about any big company CEO you think in imagination that he has Rolls Royce he came in Rolls Royce every day. Rolls Royce is suit for Google CEO not the mini van you get the point thats same is applicable in investing or in bonds what suits you thats the most important.
if you ok to taking risk then you can invest your in risky bonds or on stocks and then you can sleep well then thats suits you but if you invest your money in stocks and your only thinking about stocks, what will happen with my money, can I make money or not then bonds investing is for you safe low return bonds is for you. When you invest your money this think you have to keep in mind.
Decide what you want in life
When you invest your money you have to ask lots of questions to ourselves what you want from life if you want to be super rich with the help of investing then bonds doesn’t help you too much you have to invest your money in stocks or invest money in venture capital thats make you super rich, you are saving your money for retirement then you have to take safe bets then bonds is for you, you are investing money for your children education then bonds is for you and you want quit your job as fast as then also bonds is for you. Lots of questions you have to ask when you invest your money then you get clarity what you want from life and whether you want to invest your money.
Fortunately, you don’t need to be all that specific in your future goals to formulate a fairly good financial plan. You merely need to be somewhat clear about how much you and your partner will likely be earning (if anything) and how much you will likely be spending over a certain period of time.
Planning for future nest
I am not going in deep in retirement planning I am just going to share you some insights lets you want to retire at 65 age and you think that your expense will be $50,000 a year and your income is $20,000 a year then you need $30,000 to live good life at the time of retirement you should have corpus of $6,00,000. Because most financials planner suggest that you have to save money of 20 times extra than your yearly expense thats will give you good retirement net. At a retirement age if you do SWP (systematic investment plan) of $6,00,000 thats money is enough for you whole life.
This blog is becoming too big so we will discuss things in the next blog post, we will start from same point where we leave now. Thank you for reading a blog If you liked it pls comment on blog thats help us to grow.