Explore different options when purchasing bonds - Ahwatukee Foothills News: Money

default avatar
Welcome to the site! Login or Signup below.
|
||
Logout|My Dashboard

Explore different options when purchasing bonds

Print
Font Size:
Default font size
Larger font size

Related Stories

Posted: Tuesday, February 26, 2013 3:26 pm

As an investor, you may find that bonds can be a valuable part of your holdings. But there’s more than one way to own bonds, so you’ll want to be familiar with the various investment vehicles available — because the more you know, the better the choices you’ll be able to make.

So, let’s look at three popular ways of owning bonds:

• Individual bonds. When you buy an individual bond, you will receive predictable interest payments. And when your bond matures, you’ll get the original principal back, unless the issuer defaults, which is not common in cases of “investment grade” bonds. However, the value of your bond — the price you could get for it if you sold it on the open market before it matured — will fluctuate over time. In general, you’ll pay at least $5,000 for an individual bond, though that amount may vary. Consequently, while this approach gives you more control, it can be more time consuming and require a larger investment in order to build a diverse fixed-income portfolio.

• Bond funds. By investing in a bond-based mutual fund, which may own dozens of different types of bonds, you can efficiently increase your diversification, which is important, because diversification can help reduce credit risk (although it can’t guarantee a profit or protect against a loss). A bond fund does not pay you a fixed rate of return; instead, you receive dividends, which will fluctuate based on the underlying bonds’ interest rates and capital appreciation. In addition, bond funds don’t have a maturity date when principal is repaid. Keep in mind that when you purchase bond funds, you could be subject to capital gains taxes in two different ways: if you sell your fund shares for a profit or if the fund manager sells an underlying bond for more than it’s worth.

• Bond UITs. A unit investment trust (UIT), like a mutual fund, contains a variety of bonds, so you get the benefit of diversification. Unlike a mutual fund, however, a UIT is not actively managed and does not change its holdings. And since no manager is involved in making changes or trades, a UIT has low management fees. A UIT is typically established for 20 to 30 years, but, as an individual investor, you can sell your shares whenever you want, for whatever the market will bear.

Although UITs can be some of the most cost-efficient, low-risk options in the fixed-income arena, they are not without risk. Specifically, since a UIT’s bonds provide fixed interest rates, there’s always the possibility that the bonds will lose purchasing power to inflation over time.

When choosing how to own bonds, you’ll need to evaluate many factors — and we’ve only looked at some of them. You may want to consult with a financial advisor to determine which methods of bond ownership are appropriate for your needs. By doing your homework, and getting the help you need, you can maximize the advantages of adding bonds to your investment mix.

• This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Kim DeVoss, CFP. Reach her at (480) 785-4751 or Kim.DeVoss@edwardjones.com.

More about

More about

More about

  • Discuss

How to Have the Best Phoenix Summer Ever

Phoenix New Times A A We know. You know. Everyone knows. Summer's here. And rather than bemoan the season that brings record-breaking weather …

Published: June 28, 2016 - 12:53 pm @ http://www.phoenixnewtimes.com/arts/how-to-have-th…

What Guston Means to Me

Every artist has a list of heroes—forebearers who’ve saved their ass in moments of doubt in the studio. My list is short, starts with Masaccio…

Published: June 28, 2016 - 12:52 pm @ http://glasstire.com/2016/06/27/what-guston-means-to-me/

Everything coming to Netflix, Amazon Prime, and HBO Now in July

The battle between Netflix and Amazon may go on for decades to come, but Amazon strikes a distinct blow this month as it wrestles control of a…

Published: June 28, 2016 - 12:48 pm @ http://www.theverge.com/2016/6/28/12051008/netflix…

'Dark Money' Donation Growth Surges In Arizona

Published: Monday, June 27, 2016 - 2:20pmUpdated: Monday, June 27, 2016 - 4:37pm downloadThe impact of so-called dark money has been increasin…

Published: June 28, 2016 - 12:33 pm @ http://kjzz.org/content/326569/dark-money-donation…

Safety Net Clinic Workers Catch Break on Student Loans

Montana Advocates Slam Supreme Court's Ruling on Medical Marijuana Supreme Court's Texas Abortion Ruling Gets High Marks in New York Supreme C…

Published: June 28, 2016 - 12:32 pm @ http://www.publicnewsservice.org/2016-06-28/health…

Whiskey Fire burning near Kingman, Arizona

KINGMAN, AZ - A new fire is burning in northern Arizona. The “Whiskey Fire” is burning 20 miles southeast of Kingman, in the Wabayuma Peak Wil…

Published: June 28, 2016 - 12:21 pm @ http://www.abc15.com/news/region-northern-az/lake-…

Ahipoki Bowl coming to Chandler in July

Ahipoki Bowl, a California-based seafood bowl concept that made its Arizona debut in Scottsdale in April, is coming to Chandler in July. Diner…

Published: June 28, 2016 - 12:22 pm @ http://mouthbysouthwest.com/2016/06/28/ahipoki-bow…

Facebook Thinks It Has Found the Secret to Making Bots Less Dumb

If there’s one thing we’ve learned about bots over the years, it’s that they aren’t too bright. From Eliza to Tay, the best-known chat bots ge…

Published: June 28, 2016 - 12:20 pm @ http://www.slate.com/blogs/future_tense/2016/06/28…

Eye to Eye

By Mark Trecka In October, 2015, New Mexico-based interdisciplinary arts collective, Postcommodity, executed the largest binational land art i…

Published: June 28, 2016 - 12:20 pm @ http://www.beaconbroadside.com/broadside/2016/06/t…

Kuss looking for European experience to help sharpen skills

All roads continue to lead up for mountain-biker-turned-road-revelation Sepp Kuss. The 21-year-old newcomer has already established himself as…

Published: June 28, 2016 - 12:03 pm @ http://www.cyclingnews.com/news/kuss-looking-for-e…

Facebook

ahwatukee.com on Facebook

Twitter

ahwatukee.com on Twitter

RSS

Subscribe to ahwatukee.com via RSS

RSS Feeds

Spacer4px

Most Popular

Online poll

Loading…