What is the difference between a Term Deposit and a Bond?
Term deposits and bonds fall under the category of fixed income. They are relatively risk-free investments that you can use to strengthen your portfolio, like all investment options, they both come with their fair share of pros and cons.
ETF and other exchange traded bonds
An ETF is an investment into a fund that trades some asset. This is often a combination of shares of stock, futures, foreign currency etc. These ETFs are usually built to track an asset or index such as the ASX200 Australian share index. They allow you to invest in an asset (the ETF) that will […]
How the market impacts bonds
The basic principal with interest rates is simple. When economic growth is strong and inflation is rising, the Reserve Bank of Australia will increase interest rates in an attempt to slow the growth and ease inflation. As interest rates rise, new bonds are issued with higher coupon rates. This means that the new bonds return […]
Bond Funds
Bond Funds, like Stock Funds offer professional selection and management of a portfolio of Bonds for a fee. Through a Bond Fund you can diversify the risks across a range of bonds pre-chosen by the manager. Some funds are designed to follow a market, often called an Index Fund. Other Funds are actively managed according […]
How much is a bond worth?
Most Bonds have a face or par value, which is what the bond will pay back at the end of the term (maturity date). The face value can be different for different Bonds, anywhere from $1 to $1,000,000, traditionally however, they are quoted as if the Bond is worth $100, even if the single bond […]
Secured Bonds versus Unsecured Bonds
We continue our beginners series discussing the different types of bonds available. Bonds can be split into two main categories, Secured and Unsecured Bonds, each with different risk factors. With a Secured Bond, the company issuing the bond is willing or forced by the lender to offer something with a market value as collateral making […]
Bond Credit Rating
To ascertain a particular risk profile of a bond it can be marked with a credit rating from various credit rating agencies. There is a range of credit ratings available for bonds and credit agencies like Standard and Poor’s and Moody’s score a bond from AAA (the best quality) through to D. This is an […]
Bonds can be safer than shares
First and foremost, bonds are much safer and secure than shares and bond prices are much more stable and boring. One of the main reason for this is that share prices move much more on speculation and market hype which is further increased by algorithm and computer trading. Bond are boring and boring is good. […]
Yield to Maturity vs Coupon
Yield to maturity and coupon rate are the two main measures you need to take into account when evaluating bonds for investment. The coupon rate shows you what your annual return from the bond will be and that means you are able adequately to plan your income into the future. Every bond will show you […]
Premium and Discount bonds
Are you aware of the difference between premium bonds and discount bonds? Investors purchasing Bonds on the primary market (the initial issue of the bond) usually pay the face value of the bond which is usually but not always $100. After that, on the secondary market, the price of the bond will fluctuate mainly due […]