Your Questions About How To Invest In Bonds

Thomas asks…

questions regarding investing bonds and its interest rare?

can the interest rate of the bond changes before its maturity date? are issuers allow to do that? when you invest in bonds, does that mean you are almost guarantee to get your money back, unless that company goes bankrupt?

John answers:

The yield on a bond can change based on market conditions. If interest rates go up, the value of the bond will go down and vice versa. As a bond holder, you are a creditor of the corporation. If it goes bankruptcy, you might not collect. Check out Yahoo Finance

Joseph asks…

How do you find out if a corporate bond is first debiture and colatoralized?

Interested in investing in bonds want more than surface data to the details on the bond. Where can I find the true details of a bond?
Is there anywhere on the Internet to check the prospectus?

John answers:

In the prospectus

Sandy asks…

Can a company choose not to pay the interest on bonds that they issue?

I’m considering investing in bonds, issued as subordinated debt by a company. While I doubt that the company will ever go bust, is it possible for it to choose not to pay the interest on a bond, as opposed to simply defaulting?

John answers:

Deciding not to pay interest on a bond is absolutely defaulting. On YA there is this misperception that “default” = “debt repudiation”. That’s just not the case. If you miss an interest payment on a bond, you are in default on that bond. That means that the bond becomes immediately due and payable. Since missing an interest payment puts you in bankruptcy, the company will not pay interest on any bonds (and if they did, the bankruptcy court in the US would require that receivers of the coupon payment give it back in a clawback since that was unauthorized preferential treatment of a creditor). That means all the bonds are due and payable.

The “subordinated” part is only important for determining your recovery rate in a bankruptcy.

George asks…

Which one would be better to invest in stocks or bonds?

I was told bonds have a %4.32 interest.But my company will meet 50 cents for every dollar up to 6% on stocks. But stocks are unreliable and economy is not good right now. Would it be smarter to invest in bonds?
Yes I’m talking about a 401(k) plan they will match 50% of whatever I put in up to 6% of my pay check.

John answers:

Stocks. Faster returns and more liquid. That means you can sell it at any time. With bonds, you need to find a buyer first.

Maria asks…

How Benefical is life insurance for children?

Is it better to invest in bonds or start a savings acct ?

John answers:

Life insurance is generally not a good ‘investment’ for children. The benefits of life insurance for children:

You ‘lock in’ their insurability. If you buy a policy for a child, and keep paying the premium, it will be there for their whole life, no matter what happens to the health of the child in the future.

You can put away money that can grow ‘tax deferred’.
There are UVL (Universal Variable Life-Insurance) policies that are a hybrid term-insurance/investment vehicle. The gains on the investment vehicle are tax-deferred. However, the fees associated with those accounts are rather steep. The tax-deferral makes up for some of the fees, but from a purely investing point of view, it’s probably not the best way to go.

If you’re looking to invest for your child’s future, consider a savings account, or mutual funds. If you’re specifically interested in saving for your child’s future eduction, I’d look at Section 529 plans. They allow you to invest money that will grow tax-deferred, and can be used for college expenses. Here’s a website that can help you find the best 529 for you depending on where you live. Http://www.savingforcollege.com/kiplinger/plan_details.php

I hope that helps.

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