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Which Types of Bonds Should You Choose Now?


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Types of Bonds for Investors

Types Of Bonds

If you have decided to put aside some money in bonds, then you will first need to determine which types of bonds you are most comfortable with purchasing.  There are a number of different types of bonds to choose from on the bond market, and which is the best bond for you should be based largely on your tolerance of risk and your investment goals.

The most popular bonds are municipal bonds or government bonds, corporate bonds, asset-backed securities and mortgage-backed securities, as well as international bonds.  Bonds can further be broken down by the sector of the market that you wish to invest in, and by issuer, coupon rate, credit rating, yields and more.  Each bond offers a unique balance of reward and risk.

The Easiest Way To Determine Types Of Bonds

The easiest way to determine the type of bonds that you should be investing in may be to look at the stage of life that you are currently living in, since different life stages usually translates to different investment objectives.  For example, if you are in your twenties and thirties, then your tolerance of risk is higher in most instances, because you are not looking retirement down the nose.  You are at a better position during this life stage to go for bonds that offer high-yield returns.  High risk bonds with high coupons can be the right choice, even though there is a chance that your investment will turn sour.  The thinking is that even if you lose on an investment while young, you still have many years to grow your retirement fund and meet other financial goals. These are risks that you might not make when reviewing different types of bonds in your forties or fifties, when you can see the light at the end of the tunnel and your retirement is looming just a few years into the future.

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