Archive for the ‘Investment’ Category

Posted on January 2, 2012 - by admin

All About Fixed Term Bonds

Most investors should have a mix of stocks and bonds in their portfolio to diversity their risk as well as access to money.

A bond—the most common type of fixed income investment—is essentially an “IOU” in which an investor agrees to loan money to a company or government in exchange for a predetermined interest rate.

Bonds generally provide higher rates of interest than other bank accounts, so fixed term bonds are ideal for people who have spare money that they can afford to lock away for a fixed period of time.

Most fixed rate bonds are long term lasting on average at fifteen to twenty five years. Banks tend to offer bond terms in  increments of five years at a time unless the customer does not mind being locked in for a longer period of time.

Variable rate bonds offer investors fluctuating interest rates,. These bonds are perfect for those people who want to put money away, yet still like to keep their finger on the pulse of the market as far as interest rates are concerned. By having variable bonds, they can adjust their interest rates after the initial period of time to be sure and not lose money. However, this adjustment usually costs a fee so be sure the fee outweighs the change in rate.

Overall most people prefer fixed rate bonds to variable, especially in challenging economies.