December 27th, 2009 | 
Author: In today’s world most of the investors prefer to make investments in bonds as it helps creating a properly balanced portfolio for them. Bonds are nothing but loans. They are basically investor owned utility where the investor provides a company or a government agency with loans for a period that is more than a year. The company or the agency will issue bonds against the loan provided by the investor. These investments promise to pay the investors some interest along with the principal amount on a particular date known as the maturity date.
The bonds are generally issued by companies or corporations, government, government sponsored institutions like Federal Home Loan Mortgage Corporation, credit institutions, supranational agencies like the Asian Development bank or the European Investment Bank and various other institutions. However, at present different types of bonds are available in the market. The different types depend on the credit quality, maturity, issuer type and tax status. Besides, bonds can be both secured and unsecured. The different types of bond include fixed rate, inflation linked, high yield, asset backed securities, zero coupon, perpetual and subordinated bonds.
However, there is a big difference between stocks and bonds. The latter promise the investor to return the total principal amount along with some interest. However, stocks make no promise about the returns or dividends. Again the time limit of bonds is finite, whereas stocks do not have any definite time limit. However, similar to that of stocks a person can purchase the bonds from the open market.
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Posted in Stocks