Definition: Investment Bonds
As an investor, you have many different options when it comes time to decide where to put your money.
Investment bonds are just one of many options, but they are one that should form at least some part of any balanced investment portfolio.
Really, What is an Investment Bond?
At their core investment bonds are debt notes.
They can be viewed as a formal IOU between a government or company and investors.
Image Source: What is an Investment Bond?
When an investor buys a bond, what they are really doing is loaning money to the government or company that is selling the bond.
3 Key Terms that You Should Know About
Investment bonds have a couple of key pieces of information that help investors decide which type of investment bond to purchase.
These features include:
1. The initial bond purchase price
2. The time to maturity
3. Coupon rate
The time to maturity is how much time can pass before the bond issuer pays back the investor.
These terms can range from the very short (1 year) to the very long (30 years).
The next number your need to look at when considering investment bonds is the coupon rate.
This is the term refers to the amount of interest that will be paid to you on your investment – on an annual basis.
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