Archive for Bonds
March 27, 2009
- The Basics Of Bond Investment
Any investor in bonds needs to do extensive homework. You need to scrutinise the projected earnings, or examine any debts or irregularities, or any possible legal entanglements, as each of these factors considerably affect you. In the end, you are merely a bank, and you are giving a loan to a party and you need to know that you'd be paid back.
Now, there is not a central exchange for the trading of bonds if you're not at the stock market. Yet, the procedure is almost as simple as trading stock. You need a brokerage account from a qualified full-service broker or an on-line trading account. It would be necessary to call in or place an order on the Internet. Yet that's the easy part, it gets slightly more complicated after that.
- Do You Know What A Bond Is?
When you needed something and you didn't have the money to buy it, what did you do? You went out, borrowed, bought whatever you wanted and then returned the money with interest.
Well companies and corporations need money too – to expand, to better their technology, to hire more people, whatever. Most commercial enterprises need money for various things to run their business. Unlike you or me, commercial ventures have a choice when it comes to borrowing. They can borrow from the bank or they can release more ‘stock' into the market. Or of course, they can borrow from you and me. This is really what a bond is all about. The people lend the money and they get a bond in return. This bond really is a promise that they will get paid back.
- Eurobonds Are Not Only For The Europeans
What exactly is a Eurobond? Well, it's a bond which is issued as well as traded in a different country from the one where its currency is denominated. The funny thing is that a Eurobond does not necessarily have to originate or circulate only in Europe. Most Eurobonds however, are issued for trade by investors in Europe.
Now this can get quite creative. You could have a Eurobond denominated in US dollars but an Australian company can issue them in Japan. Or you could have the French issuing these bonds that are traded in Japanese markets. Look at Wal-Mart for example. They issue these bonds which are denominated in US dollars but sell in the exchanges in Germany! What's more, the Iran government floats them too.
