The Motley Fool Discussion Boards
Investing/Strategies / Bonds & Fixed Income Investments
|Subject: Bonds & Fixed Income Investments: FAQS||Date: 2/14/2007 2:53 PM|
|Author: Lokicious||Number: 19778 of 35367|
“Bonds and Fixed-Income Investing” is a huge topic, probably even bigger than “stocks.” The FAQs for this board have been a long time in the making and are very long.
For this reason, we have divided the FAQs into several parts, each with sub-sections, in the hope of making them more manageable for readers.
However, we do feel it is important to retain the central concept around which this board was formed (for which Paulecker deserves the credit), namely that the whole range of options that broadly fall under “bonds and fixed-income investing” be considered together, including those offered by banks and credit unions, marketable bonds and bond funds, which get most of the attention from Wall Street and brokers, and U.S. Savings Bonds.
Too often advice on “fixed income investments” comes from those who have knowledge about or a vested interest in one set of options—banks will sell you CDs, brokerages bonds and funds.
Investors needs to be aware of all the possibilities, because individual circumstances vary and because the advantages and disadvantages of the various options are ever changing, so the best choice for one individual at one moment will be different from the best choice for another individual at the same moment or the same individual at another moment.
Many board participants have contributed to these FAQs. Chris Crosenfield, Jackcrow, and KenAtPCS, as well as Lokicious, the prime author, have written sections. 2Old4BS undertook a major editorial rewrite for the first three parts. Others have offered suggestions, corrected mistakes, and added missing information and links.
Most importantly, the FAQs are the outgrowth of questions brought to the board and discussions of those questions by the community. Some really are frequently asked questions. Some information comes in answer to specific problems people have encountered that are likely to recur. Then there are the “why doesn't this make sense?” questions and the “which is better?” questions that have forced us to look beyond conventional wisdom, which is, after all, what Fools are supposed to do.
Part 1: Concepts, Definitions, Overview of Options and Risks
1A: What are Bonds? What is “Fixed-Income” Investing? Are there Bond Funds? A Few Provisos.
1B: Basic list of “bond and fixed-income” options and a brief overview of issues involved in how to choose between them. Definitions related to “income,” interest” and “yield,” including yields on tradable bonds. Some factors affecting yield. A discussion of how interest rates are determined.
1C: Introduction to risks pertaining to “bonds and fixed-income investing.” Some calculators.
Part 2: Cash-in Options
2A: Savings Accounts and Money Markets. Certificates of Deposit (CDs), including laddering
2B: US Savings Bonds (I-bonds, EE-bonds, legacy Savings Bonds)
2C: “Emergency” Funds
Part 3: Tradable Bonds
3A: Treasury Bills, Notes, Bonds, and TIPS
3B: Corporate Bonds (including “Junk” bonds)
3C: Government-Backed Mortgage Securities and Agency Bonds. “Strips” and “Zeros.” Municipal (“Tax-Exempt”) Bonds.
Part 4: Bonds Funds
4A: General Description of Bond Funds. Types of Bonds Funds. Expenses and Minimums. Advantages and Disadvantages of Funds Versus Individual Bonds.
4B: Bond Fund Risks
4C: Some Specific Types of Bond Funds: Aggregate (“Total”) Bond Market Index Funds. Inflation-Protected Securities (TIPS) Funds. International Funds. Exchange Traded Bond Funds. Closed-End Funds and Terminal Trusts.
4D: Fixed and Inflation-Adjusted Annuities
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