Getting Started in Bonds by Sharon Wright

By Sharon Wright

I picked up this e-book on the library hoping to profit a bit extra approximately bonds. regrettably, this ebook is poorly prepared and does not spend adequate time introducing the fundamentals of bonds. It has a few beneficial photos, yet i could not make it previous the 1st 50 pages earlier than I gave up. I borrowed "All approximately Bonds, Bond Mutual cash, and Bond ETFs, third version" and this can be a lot clearer to me.

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In this case, holders of inflation-indexed bonds would be sitting pretty as other bond investors see the purchasing power of their fixed interest and fixed principal decline—a decline probably magnified by higher interest rates decreasing the value of their holdings in the secondary market. THE TREASURY AUCTION Okay, now that we know all about what kinds of Treasuries there are, how do you buy the things? You can buy them either from the government (Treasury) when they first come out (the primary market) or from a previous owner after they’ve been issued (the secondary market).

However, remember that in a deflationary environment the prices of the things you are spending money on have declined, so you have not lost any purchasing power. And the great part is, if deflation causes the principal to decline below the face value (the amount of money you loaned the government when the bond was issued) at maturity, the government will still pay you back the original face value. The government has guaranteed that you won’t lose money with these bonds. Pretty neat: upside with no downside.

This is true of all traded securities because shipping paper around would be too cumbersome, timeconsuming, and open to loss or theft. The Treasury issues two types of securities: fixedprincipal and inflation-indexed. Fixed principal means you know how many dollars in principal you will be getting at maturity. S. government. S. government. S. government. simple interest interest is paid once, so there is no compounding during the year; the interest rate used for discount securities. S. GOVERNMENT BONDS know your principal will have the same purchasing power when it matures; however, the number of dollars is not known since the amount of future inflation/deflation is not known.

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