Buying Bonds: 10 Tips
When it comes to buying bonds, 10 Tips are essential to guide you, considering how many different kinds there are to choose from and many investment strategies to try. You can buy corporate bonds, municipal bonds, short term bonds and long term bonds. Before you choose which ones to buy, do some research to decide the best approach to take for your long term investment goals. It is a good idea to mix up your bond selection, to diversify your portfolio.
- Invest in a bond Exchange Traded Fund, or ETF. An ETF has different bonds mixed together in the price, which is a good way to spread your risk.
- Buy a short term and long term bond. When you vary the maturity date, you can often get a greater return on your investment.
- Invest in zero coupon bonds. If you do some research, you can find zero coupon bonds that are not taxed on any level.
- Buy a Bond unit investment trust. You earn interest income until the maturity date, and then you will get your investment amount back to use as you see fit.
- Choose a mutual fund that is made up of different bonds. Like an ETF, this will help spread your risk over a broader range of bonds
- Hedge your portfolio with several different bonds. Buy a municipal bond, a bond ETF, or a corporate bond to hedge your overall investment portfolio.
- Buy a bond money market fund. You can withdraw funds from a money market fund at any time until maturity.
- Write down the maturity date on each of your bonds. Reinvest after a bond has matured, or put the cash in another investment.
- Average your bond purchases. Buy a bond every few months, instead of loading up your portfolio at one time.
- Monitor your bond portfolio. If there is a price drop in the overall bond market, you can pick up some select bonds at a discounted price.