How to Buy Bonds As An Investment

With the stock market on a wild ride, many investors are pulling their money out of stocks, and looking for a safer port of call. Perhaps you should give bonds some consideration. Here's how to get started.

Difficulty: Moderate

Instructions

1. 
   US Government Bonds

   Get familiar with bonds. A bond is essentially a loan -- you are lending your money to someone who needs it (sometimes the government, sometimes a corporation), and they, in turn, promise to pay you back, with interest, at some agreed-upon date. See Resources, below, for more background on bonds.

2. 
   Municipal Bonds

   Learn about risk and returns. Bonds are generally considered safer than stocks during volatile market conditions. But even bonds have different levels of risk. Bonds issued by the US government (Savings Bonds, T-Bills, treasury notes, etc) are the safest of all, but also provide fairly low returns. Municipal bonds are a bit riskier, with larger payouts, and also can have sizable tax advantages. Corporate bonds carry the most risk, but also tend to pay the highest rates of interest. See Resources, below, for more information on the different types of bonds, and the risks and rewards they carry.

3. 
   Corporate Bonds

   Bonds are traded through your broker, just as stocks are. Check your regular or discount broker for details on how to invest in bonds, and on any criteria -- such as minimum amounts of purchase -- that your broker has established.
   
   See the Resources, directly below, for more information.

Tips & Warnings

• Savings Bonds, and some US Treasury bonds, can be purchased directly from the government. Ask your broker for details.

Resources

• Bond Basics
• Buying Bonds

[JoyNmyHeart]

on 10/9/2008 As always, very helpful! Thanks for the info!

[missforty]

on 10/9/2008 Thanks!