Investment Bonds

According to www.investopedia.com, bonds are an issue by borrower to a lender. In terms of investment bonds, we can call these lenders investors.

The borrowers are usually companies and government. Companies issue corporate investment bonds.

Government issues Government Investment bonds. Investors earn from interest. Most of the time interest is paid semi-annually.

Bonds terms vary from 1 to 30 years. At the end of terms, bonds will mature and investors receive the principal amount. Investing in bonds can be a good way to earn additional income.

Just like lending money, investing in bonds is risky to some degree. There is always a risk that the issuer go bankrupt or for some reason can not fulfill its obligation. On top of that, there is also risk of inflation that pushes the interest rate up and bond prices down.

In this situation, investors may not earn profit by selling the bonds, in fact they may even suffer big losses. This is why it`s better for beginner investor to start with conservative investing and only start aggressive investing as they gain more knowledge and experience.

It may be safer to invest in bonds that are backed up by the government. This form of long term investment has returns from that are usually higher than GIC or CSB.

But aggressive investors may also find Mortgage backed bonds and Asset backed bonds appealing. They usually offer quite high return to compensate for the prepayment risk on top of inflation risk that investors are taking. The best investment bond is basically the one that fits the investor`s need.