Creating wealth will probably involve the purchase and inclusion of bonds in your investment portfolio. When you purchase bonds, you are lending the bond issuer your money in return for a fixed rate of return on their investment. Bonds are known as fixed-income investments, the investor is a creditor of the company.
Issuers of bonds can be corporations, the federal government, cities or states. The interest paid on bonds is generally paid quarterly, payment on some bonds however occur on the date when the bond matures and the borrower gives you payment on the principal amount of the loan.
Bonds issued by the U.S. Government are known for being exceptionally safe investments. Municipal bonds, corporate bonds, bonds issued by states and cities can be considered safe or referred to as high-risk investments. Bonds issued by a city or state does not guarantee your investment or their safety. Creating wealth does involve some informed risk after diligent research has been performed.
Your interest is locked in when you purchase bonds, and that is the risk you take when you buy bonds. Bonds in your investment portfolio may be locked-in at a lower interest rate while the interest rates in the market are increasing or rising. However, they may be a more comfortable investment for those anxious about the volatility of stocks. Creating wealth requires making investment decisions based on current market trends.
The values of stock shares are not fixed like bonds. The value of stock shares go up and down contingent on what is happening in the stock market and the company whose shares you have purchased. With stocks, you are not a creditor you are an owner. Your plan for creating wealth may involve purchasing stocks, bonds and mutual funds as part of a fully diversified investment portfolio.
Bonds are rated for risk or safety by bond rating companies like Moody’s, A.M. Best, Standard and Poor’s. Bond rating companies assign each bond a grade between A-C, “A”, indicating a low risk or “C”, indicating a high-risk investment. The assigned bond grade is an indication that the issuer of the bond is likely or not to pay the principal and interest as agreed. High yield bonds are bonds with a high interest rate and are referred to as “junk-bonds”. The use of the word junk, attached to bond should indicate some type of warning regarding the risk. Be sure to do your due diligence before making any kind of investment decision.
Creating wealth [http://www.casfinancialgroup.com?t=bondsinportifolio] with the purchase of property or real estate, stocks, bonds and mutual funds indicates the investor has a fully diversified investment portfolio, and has a good chance reaching his or her wealth objective. Diligent research and knowledge about the investments of choice will reduce the risks of investing. The greatest risk to any investor is lack of knowledge.