what is bond
Quote by ojk.go.idBonds belong to the fixed-income investment securities with the aim of increasing a stable investment value.
The bonds are accompanied by debentures that can be issued by companies or governments in the medium or long term with the aim of redemption dana by investors without selling their shares. The Notes issued mean payable bonds.
Bond liabilities are debt instruments issued by a bond issuer, e.g. B. the government or a company traded in the bond market. Don’t think of this debt like other debts, such as B. Bank loans, since bonds have a longer term.
The bond has a term, typically for several years, and the bondholders are paid a fixed rate of interest for as long as they are in their possession. The interest and principal of the bond will be repaid at maturity by the company or government that issued the bond to the bondholders.
Basically, investing in bonds is a form of investment that offers a higher interest rate than Deposit Banks and more stable than stocks because it is one of the most popular forms of investment.
However, buying bonds still carries risks. What are bonds and their risks? As an investment, bonds naturally have risks, namely the risk of inflation and the risk of default or default of the bond issuer. Therefore, investors need to think about and consider the risks before buying bonds.
types of bonds
There are several types of bindings that are commonly found. Come on, know what it is and the explanation.
- government bonds: These are bonds issued by the state government.
- corporate bonds: These are bonds issued by private companies.
- municipal bonds: These are bonds issued by local or municipal governments
- mortgage bonds: These are bonds issued with property as collateral
- Fixed Rate Bonds: These are bonds that are issued with an interest rate that is always the same as long as it is held by the bondholders
- Bonds with falling interest rates: These are bonds that are issued at a declining interest rate
- convertible bonds: These are bonds that can be converted into shares in the issuing company
- Tax Free Bonds: It is an unencumbered bond Tax flower
- Index Linked Bonds: These are bonds whose interest rate and principal amount are linked to a stock price index or to inflation.
- Short-term bonds: These are bonds that have a short maturity to pay interest and a short amount of principal. Usually the time frame is less than 1 year.
- Sharia Bonds: Is a bond that uses principles and laws Islamwhile avoiding what is forbidden in Islam.
These are just some of the other types of attachments that exist in this world. There are still many types of bonds not mentioned here, such as bonds that may have exposure to government and financial markets.
Also read: 3 types of profitable short-term investments
Example of bonds
Of course, with different types of bonds, there are several examples of bonds, such as:
An example of a government bond is US Treasury bond, savings bond or municipal bond.
An example of a corporate bond is corporate bonds from Apple, Microsoft or ExxonMobil.
Foreign currency bonds are bonds issued in a foreign currency, such as Eurobonds or Samurai Bonds.
These are bonds that a bond issuer, such as B. a company or the government, for small amounts, e.g. B. a few thousand dollars, to individuals.
- bonds from developing countries
These are bonds from developing countries such as Brazil or India.
These are just a few examples of existing attachments, with other types of attachments, there are many more examples of attachments in this world.
Bond Investing Considerations
Given the popularity of bond investing due to the lower risk and relatively stable returns compared to stocks, if you want to invest in bonds, there are several things to consider, such as:
The objective of investing in bonds is like any other investment, e.g. B. the pursuit of stable returns.
Bonds are an investment with a lower risk of default than investments in stocks, but of course there are risks involved, such as: B. that the issuer of the bond does not pay back interest and principal. Be sure to think about this before investing in bonds.
Credit rating is an independent assessment of the bond issuer’s ability to service debt to investors.
Term is an important factor as it affects the interest rate bondholders receive. In general, long-term bondholders receive higher interest rates than medium-term bondholders. But also the risk that one possesses automatically increases.
Investing in different types of bonds reduces portfolio risk for investors. Diversify your portfolio by buying different types of bonds with different maturities, issued by different issuers and by different companies currency different.
Also read: Don’t be wrong! Know the trading hours now!
The difference between stocks and bonds
Bonds are a form of investment and are different from stocks. What are bonds and how are they different from stocks?
Although both are types of instruments finance Using corporations or governments to raise funds from investors, there are some key differences between the two. Come understand the difference between stocks and bonds by reading the explanation below.
The difference between stocks and bonds is that stocks are a sign of ownership and represent the inside of a company while bonds are debentures that declare that the owner of the bond is lending money to the issuer.
Stocks are more risky than bonds because if the company runs into financial difficulties, shareholders will suffer huge losses. Unlike bonds, which have low risk but have a risk of default if there is a chance that the issuer will default.
The potential return of share higher than the yield because the issuer’s stock has the potential to perform well. However, bonds only offer bondholders a fixed rate of interest.
One of the differences between stocks and bonds is the time period they both have. Stocks have an indefinite lifespan, but bonds have a fixed term and a specified maturity.
One difference between stocks and other bonds is that stocks have a greater impact than bonds. This is because companies, unlike bondholders, are required to pay dividends to shareholders.
So that is an explanation of what bonds are and what types they are, as well as considerations to make before buying bonds. Even if it involves a small risk, be careful to manage your finances, e.g. B. to maintain a healthy body so you don’t get sick.
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