Hello, Melvin here! For all of you who wanted to learn about investments, here are some basics to help you understand abit about what we mean when we talk investments!
Starting off this series, I'd be talking about what bonds are!
Let's get to it!
What is a bond?
Bonds are loans made to organizations, can be to corporations or governments
Few things to know about bonds
Face value: The amount your bonds will be worth when it matures. It is also the value used to calculate your interest rates(coupon)
Coupon rates(%): The interest rate that you’ll be receiving from your bond
Coupon dates: Date where your bonds pay out their interest
Maturity dates: Date where your bond matures and the bond issuer will pay you the face value of your bond
Market price: Price of the bond where you trade it to another investor
So why do people buy bonds?
1. You receive income through interest payments. if you hold the bond to maturity, you will get all your principal back. Typically semiannually.
2. You can profit if you resell the bond at a higher price than you bought it.
They provide a predictable income stream. If the bonds are held to maturity, bondholders get back the entire principal, so bonds are a way to preserve capital while investing.
In a nutshell,
You lend companies money(face value)
They pay you interest (Coupon rate)
At the end of the loan, they’ll repay the loan in full!
Want a visual interpretation of this?
Check out my carousel here - https://www.instagram.com/p/B_Mb2ADFrXZ/
You guys are awesome!
Shoot me a text if you've got questions about Bonds or investing in general!