Top 4 Things You Need to Know About Corporate Bonds
Thinking about investing in corporate bonds? Then, read on to understand more.
14:39 31 March 2013
Experts always remind investors about the importance of diversifying assets to maximize earnings and to avoid losing all their money in one type of investment vehicle. With the current economic condition, corporate bonds are now more attractive compared to stocks and shares.
Here are some of the important things you need to know about corporate bonds:
- Corporate bonds are issued by a company with a maturity date of minimum of one year. They are being issued by companies mainly to raise funds for projects and additional investments.
- They are bought by investors at what is known as “par.” Just like stocks and shares, they can be bought and sold until maturity. However, keep in mind that the values can increase or decrease based on the supply and demand.
- Corporate bonds are rated. Investors who are thinking about investing on bonds should check their ratings first. Independent ratings agencies like Stardard & Poor’s, Moody’s and Fitch Ratings supply grades or ratings to companies’ debt. The bigger the risk, the higher possible return.
- Bonds are less risky compared to equities. Most investors buy bonds instead of stocks and shares when the stock market is very volatile. With bonds, investors are assured of interest on maturity date together with their capital investment.