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Of the three major asset classes, bonds are probably the least understood by investors.
That’s due to the terminology and jargon used in bond trading. Trading isn’t for retail investors, unless they have specialist knowledge and it’s what they want to do.
In its simplest form a bond is easy to understand. It’s something like an IOU: the IOU given to the investor by government, a public corporation or a company. But the IOU not only promises to pay back the capital investment at a specific time but also to pay interest, or a yield, to the investor for lending the money.
Some bonds can become more complex but don’t really depart from that simple structure. As an asset in a portfolio, bonds bring welcome diversification.
And they force investors to take a longer-term view. This section will explain how the different bonds work and how to invest in bonds.
- Finweek
That’s due to the terminology and jargon used in bond trading. Trading isn’t for retail investors, unless they have specialist knowledge and it’s what they want to do.
In its simplest form a bond is easy to understand. It’s something like an IOU: the IOU given to the investor by government, a public corporation or a company. But the IOU not only promises to pay back the capital investment at a specific time but also to pay interest, or a yield, to the investor for lending the money.
Some bonds can become more complex but don’t really depart from that simple structure. As an asset in a portfolio, bonds bring welcome diversification.
And they force investors to take a longer-term view. This section will explain how the different bonds work and how to invest in bonds.
- Finweek
