Pros And Cons of Bonds
August 9th, 2005
What are bonds?
Bonds are a basically a loan made to the company or government that sells it. In return, you can collect interest on it twice a year and it is paid back in full it at the end of its life.
Bond Analysis
Fundamental and technical analysis can be performed on them as well, in order to buy and sell them when the market is right, however the rate of return is so low on bonds that it’s almost not worth your time to do so unless you own a whole lot of them.
Pros of Bond Investing
Bonds are MUCH more stable than stocks, and that’s why we recommend you balance your portfolio with a certain percentage of Bonds to offset the damage that any possible poorly performing stocks can do.
Cons of Bond Investing
It’s a general rule (not to mention also very historically accurate) that when stocks go up in value, bonds go down. They still pay their guaranteed interest payments, but their worth at the end can be reduced a good bit if the stock market did well during the years of its’ issuance.
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