Bond investments, ranging from government bonds to non-junk corporate bonds and junk bonds, are an important investment vehicle and an important part of portfolio investing for many.
There are several important points to research before investing in the bond markets, including classification and description of bonds, corporate bond market, the mathematics and movement of bond prices, and the classes of investors as well as the taxation of bonds.
There are also bond funds, which invest in bond markets, as well as mixed bond/equity funds that allocate money on both the stock and bond markets as a way of diversification of risk (these funds may also hold cash, which has the lowest risk, but also usually the lowest fixed return rate).
There are many types of bonds with different risk/reward profiles, making them attractive to different types of investors. For example, there are zero-coupon bonds, municipal bonds, mortgage-backed securities, corporate bonds, government bonds, and U.S. agency securities.
There are also convertible bonds that have options of conversion to equity interests of the company issuing them (with lots of restrictions and covenants).
In fact, bond markets have been a continuous source for innovation, with recent developments including such bond issues as the world's first convertible negative coupon bond (where investors pay a coupon to the issuer rather than the other way around, issued by Berkshire Hathaway, the Warren Buffett company).
Learning About Bond Investments
Although there aren't as many resources for bond investors as there are for stock investors to learn about the market, you can still find great information about the bond market from online sources, books, and investment education firms.
As for online resources, good sources for information and basic information about the marketplace for bonds include:
- ft.com (for news and commentary)
- cbs.marketwatch.com (for news and commentary)
Books on the subject include: