Investment in Bonds

Municipal bonds are the informal debt instruments issued by county, state and city governments, to raise money for the community projects such as hospital, new school or a highway. The main feature of municipal bonds as a form of investment is that, the interest paid to the municipal bond owner is federal tax exempted. In addition, investors are exempted from state taxes in case they reside in the same state of issuance of municipal bonds. Usually, there are two forms of investment in municipal bonds. The first is termed as general obligation. This depends on the issuer's ability to tax and issued for payment of projects such as sewer systems and schools. Majority of investors feel that general obligation bonds are much safer as compared to their counterparts in the revenue section. However, this is a misconception. On the other hand, the local government bonds sanctioned entities or special state government entities issue the revenue municipal bonds. With the revenue generated fro...

Investors who are wondering when it's safe to get back into bonds have one thing going for them: They recognize a real risk that many don't. But the question still heads down the wrong path. Generalizations about the timing of getting into and out of asset classes are rarely accurate, and they distract from the more productive goal of focusing on what you can do to maintain your long-term financial health. The answers to several other questions about bonds, however, may help in determining an appropriate investment strategy to meet your goals. Before we talk about the state of the bond market, it is important to discuss what a bond is and what it does. Although there are some technical differences, it is easiest to think of a bond as a tradable loan. Bonds are obligations of the issuer, acting as a borrower, to repay a certain sum with interest to the lender, or bondholder. Bonds are generally issued with a $1,000 "par" or face value, and the bond's stated intere...