Are Bonds Right For You
If you listen to investors talking about their investment, I’m sure that you will hear that it is much more profitable to trade in stocks than bonds. We already know that bonds are based on debt and a company which issues bonds is the borrower. There is virtually no risk on bonds as the company which issued the bonds is bound by law to pay their obligation.
Large companies looking to expand their business need a lot of money to accomplish their goal. Usually, they need money much more than what an average bank can lend. During these cases, a company can seek the help of investors by issuing bonds to a public market where common people like me and you can buy them. Unlike stocks or equity, buying a bond does not mean that you will have a share in the ownership of the company.
There is little risk with investing on bonds but the payoff is smaller than what one can get by investing on stocks. But what’s good about bonds is that even in a bearish market, you would still draw money.
If you are a part-owner of a company, your earning will depend on the earnings of the company. So, if the company does poorly like Sony Ericsson, you will get little or no money at all. But if you have invested on bonds, even in a bearish market, you would still draw money from your investment. You can also use the guppy darvas box in determining which stock to buy for better payout. But in bonds, you have to determine whether a company or government is stable to ensure that your investment is safe.
