WHY BUY BONDS?
Bonds have several attributes that make them an attractive investment. First of all, a holder of bonds can usually expect to receive income from regular interest payments, made either semiannually or annually, depending on the bond. Additionally, the borrower (issuer of the bond) is obligated to return the principal at the end of the term of the bond. Because of these fixed obligations, buying bonds is often perceived as less risky than investing in stocks. On the negative side, bonds can lose value when inflation is high. Because a bond’s interest rate is usually not tied to inflation, the inflation can often erode your return. Also, investors should be wary of investing in bonds when interest rates are low because locking in a low rate today can prevent the investor from reaping a higher income should interest rates rise. WHAT DETERMINES A BOND’S PRICE? A bond’s price is determined by its attractiveness to investors. The key considerations, when determining a bond’s price are the bon
