Before you start investing in bonds, you need to know some information about bonds. If you don’t understand these things, you can buy the wrong bond with the wrong maturity date.
The three most important things to consider when buying bonds are face value, maturity and coupons.
The face value of a bond is the amount you will receive when the bond reaches its maturity date. In other words, when the bond matures, you will get back your initial investment.
The maturity date is of course the date when the bond reaches its full value. On this day, you will receive your initial investment and the interest earned on your money.
Corporate bonds and government and municipal bonds can be “cancelled” before the expiry date. At that time, the company or issuing government will refund your initial investment and the interest earned so far. The Bund cannot be called.
The coupon rate is the interest you earn when the bond matures. The number is given as a percentage, and you will need to use other information to determine what the interest is. A bond with a face value of US$2,000 and a coupon rate of 5% will receive a yield of US$100 a year before maturity.
Since bonds are not issued by banks, many people do not know how to buy them. There are two ways to do this.
You can hire a broker or brokerage company to buy it for you, or you can contact the government directly. If you use a broker, you will most likely be charged a commission. If you want to use a broker, please buy with the lowest commission!
Direct government procurement is not as difficult as it used to be. There is a program called “Treasury Direct”, which allows you to buy bonds, and all your bonds are kept in an account that you can easily access. In this way, you can avoid using a broker or brokerage company.