Most of us have loaned money at some point in our lives. But loans are not restricted to individuals only, there are businesses, big and small, that have to loan money from somewhere in order to be able to improve. That is why bonds are so popular right now. Another thing most of the people like about the bonds is that when working with them, you do not have to leave your home. Working with bonds from home is a great choice for single parents as well as for everyone who want to work from their living room. If you are among them, make sure you keep reading and find out everything about this job.
What is a bond?
In order to get into the bond business, you first have to know what a bond is. It is an instrument that businesses may use in order to raise money. It is basically a contract you will make with a business, where you function as a lender. When you buy a bond, you lend your money to the business who agrees to pay you back with some interest at some point in future. It is pretty much the same deal you can make with a bank when you are buying a house. Only in this case you act like a bank, and the contract you sign is like a mortgage contract.
What are the characteristics of a bond?
We have already mentioned that bond is a contract that specifies how much money you have left, and how much money will you receive at some point in future. The amount that bond is sold for and the one bond issuer will later use to calculate the interest payments is called face value. The interest issuer will eventually pay on the face value is called coupon rate. Coupon date are the dates for paying the loan back on which you have agreed on. The original price the bond was sold for is called issue price. You do not only have to buy bonds from businesses. Government also sells its bonds through a government agency.
How to buy and sell bonds?
Stocks are usually the most attractive options to beginner traders. But it only takes one bear market before they realize all the benefits bonds bring. Bonds’ price fluctuations are considerably smaller, and therefore they represent much safer bet. Most people don’t know that there are several types of bonds, some of which can’t be sold by individual traders. Surety bonds for example represent guarantees to obligees, which secure that contractor that bought them will finish the project in timely-manner and in accordance to contract.
There are also various other bonds that are suitable for exchange market trading. Some of these are:
- Treasury bonds (T-bonds)- bonds issued by US Treasury. Their minimum denomination is $1,000 and they are sold through an auction with $5 million maximum purchase amount. US Treasury bonds can be sold on secondary market and they are considered to be extremely safe, like all other securities issued by Uncle Sam.
- Municipal bonds– these bonds are less safe than the ones issued by the US Treasury, but the carry certain amount of risks, because cities and municipalities go bankrupt sometimes. Good thing about them is that they are free from federal tax, and since local governments sometimes make them debt free to boost sales, they can be completely tax free.
- Corporate bonds- there are three types of corporate bonds, short, intermediate and long ones. Short-term bonds’ mature period is less than 5 years, intermediate is from 5 to 12 years and all corporate bonds with mature period over 12 years are considered to be long-term bonds. Corporate bonds come with higher yields, but can also turn out very rewarding if business venture turns out successful.
- Convertible bonds– these can be classified under corporate bonds category and are specific because they can be converted into stocks.
- Callable bonds– corporate bonds that allow company to redeem an issue before the bond matures.
- Zero-coupon bonds– these bonds are issued with considerable discounts, and make no coupon payments. Traders can sometimes buy them for half of their par value.
If you are looking for a job you can do from your home, dealing with bonds is a perfect option. Just have in mind that even though bonds are safer than stocks, there is always some risk when working with them. Make sure you think about your every move carefully if you want to succeed.