As an investor, it is essential that you know where you will be investing. There are different categories and one of them is bonds or fixed-income securities. The term “bonds” is actually used regarding any securities which are based in debt. It is based on debt because when you buy a bond, you are lending your money to either a company or the government.

But since this is investing and you will be looking to make more money out of your money, you will not just be lending your hard-earned dollars to a company with nothing in return. After purchasing a bond, the company or a government has a responsibility to you to give you interest on your lent money. Eventually, the money you have lent to a company or a government will be returned to you.

Why are bonds attractive? Many investors choose to purchase bonds because there is virtually no risk of loosing your money. If one will purchase bonds of a stable country, that investment can be considered risk-free. Investing on bonds is good for passive investors or those investors who like just to be on the sideline and just reap the interest of their lent money.

Its advantage is also the reason for its disadvantage. This is true with almost all investing moves like Darvas method. Since there is virtually no risk in investing on bonds, the profit that one can reap from this is lower than other securities. But as I said, it is good for investors who do not have the time to keep track of all things happening to the economy. With a stable company or government, bonds will be able to give investors enough profit to justify the risk taken.

This entry was posted on Tuesday, November 6th, 2007 at 9:40 am and is filed under Investing Basics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.