You may have had to borrow money from a friend on more than one occasion: at the coffee shop, in the office, or even for cab service. Borrowing is usually your only way out when you run out of money. But companies are made to sign a ‘bond’ by law, promising the repayment of the money owed. It is a formal kind of security to ensure due payment.
However, before investing in a bond, certain conditions need to be considered. Let us take a brief tour of how you could profit from investing in a bond.
1. Before Investing
The working of a bond primarily depends on w, whether you need to invest money for the long or short term. Besides, it also depends on your tax status, the period, and investment goals. There are some basic strategies on hand, which should be considered before making any investments. For instance, putting all your assets and risks in one single asset class would not be a good idea. It is better to diversify the risks by creating a portfolio of several bonds within issuers. By choosing different issuer’s bonds, you could protect yourself from the possibility that one of the issuers may not be able to pay back the amount owed.