Investing Word of the Day: Bonds

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Aside from equities or stocks, bonds are also one of the investment vehicle to which one can invest their money.

source: http://www.icollector.com

Bonds below is defined by Investopedia.com as:

A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.

Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents.

One earns or profits from bonds primarily from the fixed stated interest paid by the bond issuer to the investor. Bonds are commonly issued by government entities and you would hear 90-day Treasury Bill, 10 year, 15 year, 20 year, and 25 year bonds issued by the Philippine government. Bonds are also issued by corporations to tap the public for money as lenders instead of investors in their company.

Also we can profit from bonds by taking advantage of its fluctuating price just like how stocks are traded.

Bonds are known as safe havens of extra cash due to the fact that bonds gives a fixed return of income through its fixed stated rate over a long period of time.

A lot more about bonds on my post on how to invest in bonds.