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Corporate Bonds

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What are Corporate Bonds?

Corporate Bonds are debt securities that are issued by all sizes of Corporations to raise capital to either continue operations, expand operations, or to raise capital for other purposes. Corporation would rather issue Corporate Bonds than borrow from a Bank because they pay lower interest than they would pay a bank.

You can buy these bonds when issued from most large brokerage firms, or in the aftermarket on most of the securities exchanges. When you buy a Corporate Bond you are interested mostly in the yield you will get, not the coupon yield. The reason for this is that Corporate Bonds pay dividends that are fixed, just like most other Bonds. So if the price of the bonds are less than when issued, called Par Value, your yield will be higher. Conversely, if the Bond price is higher than Par Value, the yield will be lower than when issued. So the two components of Corporate Bonds that will result in your yield are the price and dividend. Corporate Bonds generally yield more then C-D’s but also entail more risk and are not guaranteed against loss by S.I.P.C.
 

Bonds are rated for their solvency and ability to pay their dividends to bondholders. The rating agency is called Moody’s. The best rating is “AAA”, and the lowest is “C”. The lower the rating, the higher the yield will be, since investors want to be compensated for the added risk. Any Corporate Bond that is not rated is called a “Junk Bond”. They pay the highest yield, but can be risky.

So compare current Corporate Bond yields and consult a specialist in Corporate Bonds before making a purchase.

The easiest way to purchase a Corporate Bond is to buy a Corporate Bond Mutual Fund.  In addition to having a professional management team to select the bonds, you can get a check sent to you every month in the event you need monthly income. Since there are sometimes 100’s of bonds in the mutual fund, the risk is spread out more than buying a single issue. And with Corporate Bond funds, they are easy to sell. You can buy funds that have no sales charges directly through a no-load fund family, or through a financial advisor who will offer you guidance but will entail sales charges.

Please choose from the list of topics for additional information:

401K Rollover Annuities Bonds Investing
Corporate Bonds Forex Trading Futures Trading
Investment Advice IRA Investing Mutual Funds
Mutual Funds Comparison Options Trading REIT
Roth 401K Roth IRA Tax Liens

 

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