What are Bonds

Ultimately the reason people invest in anything is to earn a return on their investment, and bonds are no exception. Bonds as an asset class offer several unique attributes that make them attractive to a wide variety of individuals.

A constant stream of income

While there are exceptions, bonds pay a fixed rate of interest, at regular intervals, and on pre determined dates. The income stream that you earn when buying a bond is predictable. Come rain or shine, as long as the issuer of your bond doesn’t go bankrupt, you get your interest payment. Generally interest is paid every 6 months but there are variations depending on the type of bond you buy.

TO DIVERSIFY YOUR PORTFOLIO

To diversify our clients portfolio here at drummond-willoughby we quite often have bond funds avialable. When bond prices are rising, often the stock market is performing poorly, and vice versa. Because of this “lack of correlation” we enourage investors who hold a lot of stocks in their portfolio, to add some bonds into the mix.

TAX SAVINGS

Certain bonds, such as Treasury and Municipals, offer some unique tax benefits which include not having to pay federal, state, and or local government taxes.

ANNUITIES

Annuities are issued by insurance companies and are one of the most popular retirement investments.

They allow investors to accumulate tax-deferred money and withdraw it when it’s needed. There are three main types of annuities. Fixed annuities guarantee the investor a fixed interest rate for a certain period of time determined by your contract.

Variable annuities are a collection of investments whose earnings are tax-deferred. Earnings levels change depending on how well the market performs and the level of risk involved in your investment choices.

Indexed annuities are also tax-deferred; their growth depends on how well equity markets perform. They have guaranteed minimum interest to help investors reach retirement goals.