bond investments for private investors

Bond markets are markets for almost as long as equity. For most private investors, such as bonds are less attractive relative to government bonds, probably due to the relatively stable bond. You probably can also be argued that media markets, the stock market much broader than the coverage bond.

So what is a bond? Learned in school that a bond is a debt or an instrument issued by a companyGovernment. The buyer of the title is actually lending money to set up and promised the full capital plus a fixed periodic payment for the duration of the loan. The full payment received with the main A final calculation are set for the association to determine the yield. The yield, in legal terms, the effective interest rate earned on bond markets for the duration.

Some problems issuing zero-coupon Bonds that have not paid any bond during the term of office. The investor receives the difference between the purchase price for the license and the principal value, also known as face value.

While investment banking trading desks make profits on the bonds exchanged at regular intervals, through the acquisition of credit risk and duration of interest rate risk, this is often not the case for small investors who usually do not have the availability of interest live and> Bond trading data.

A small investor, the goal for the purchase of bonds may deposit rates are seen as an attempt to gain an ordinary performance better than a. The issuer is sufficiently creditworthy, investors should be able to get years of his capital in full at maturity of the bond, fifteen years, the term may have one of every three months. At the same time, investors may have the opportunity to invest on capital gains from its bindingif market interest rates should fall. This then provides a further advantage for loans on ordinary deposits.

trading of bonds. The bond market is still largely on the OTC market. Market participants include large investment banks, private banks and asset managers. Unlike stocks that are traded on an exchange and therefore have the transparency of prices, the bonds traded on the OTC market has no such price transparency;Citations are given and taken on a platform such as Bloomberg and Reuters. the lack of transparency in price from a lack of liquidity also prepared, because such a situation would be here decided to cash for a particular loan. It can be said that this is one of the reasons why investors are not very familiar with the bonds, since these stocks are.

Another possibility would be to buy bonds to buy directly from the issuer, the central bank or a company could be. Inmost cases, the minimum investment must be higher than most private investors willing to invest in one fell swoop.

Asian central banks, the deepening and development of bond markets, increased efforts in education and bond markets are seen with a key to attracting retail investors against.

If the Bond Rally Last?

Looking at the chart above, it is obvious that the shares have passed bonds in 2010. The S & P 500 (red line) is collected by 2 percent, while the ETF TLT for long-term bonds (blue line) 17 per cent since the beginning of the year. The bond spectacular rally in recent weeks has become the hottest topic in financial stocks. Bond yields, which move inversely to bond prices fell to a record low. The yield for the bond 10 years the U.S. has fallen to its lowest level2.58 percent this week and many financial experts are scratching their heads and can not understand why investors would be happy to accept such low returns and I think this rally is just a bubble that burst soon. In my humble opinion, I do not think that the bond rally is a bubble, because there is demand for bonds for some time to get a great deal.

Baby boomers are the largest group of investors beyond retirement age if their risk tolerance is low. Your financial adviser will recommendchange their portfolio allocation to a more conservative, which has a higher percentage of fixed income securities. Data of the fund's flow of money from equity funds and pension funds. The amount of money in pension funds also exceed cash equity funds, which means that the savings in new bond funds will be allocated. The saving rate American went to 6 percent, and I argue that much of the savings "from the" empty nest meansBaby boomers, who still work and earn a good income, but reduced costs. From the perspective of investors in the United States, there are few alternatives for better investment for bonds. Property prices have fallen since 2006 and still continue to fall, so there is little reason to invest in real estate.

The stock market is still 30 percent below its value in 2000 and investors in this age group will bear two stock market crashes when their portfolios have fallen by up to 50 percentevery time, so I do not think many people would like to approach their risk their retirement nest egg in an asset class that is so volatile. Bank interest rates in the U.S. is near zero, then cash is not an attractive investment choice. With over 100 bank failures in 2010, the FDIC guarantees bank deposits is nearly broke, so keep your money in the bank is not sure how the owners of bonds guaranteed by the U.S. government. While a 2.4 percent rate of return candoes not seem like much, it sure beats a negative return!

During the event bond is a relatively new phenomenon in Western economies in recent years has done more for years in Japan, whose citizens are on average bond yields continued to decline in the 10th year and continues to decline. The Japanese made 10 years recently fell below 1 percent, so that 2.5 percent of its American counterparts look attractive in comparison. Property and equity pricesalso decreases from 1989 to 1 per cent return, bonds are more attractive than other asset classes. If the United States in the footsteps of Japan, returns must fall a long way over yet, which means that the bond rally should continue for some time to come.

individual investors are not the only ones who want to buy bonds. Banks can lend at interest rates already near zero percent for loads of bond yields are veryparticularly attractive if you buy them with leverage. If you can buy $ 1,000,000 worth of bonds with $ 100K cash and borrowing the rest at zero percent, would be equivalent to 4 percent rate of return of 40 per cent return on $ 100K. This type of trade is responsible for the profits of the banks reported fat. Banks prefer to treasuries, rather than borrow money to buy people buy risky assets such as real estate or businesses.

On top of all this demand from investors and banksFederal Reserve Bank announced that buy bonds as part of its quantitative easing program plans. The Fed can buy big and deep pockets - who bought more than a trillion dollars of mortgage-backed securities last year. Hearing this announcement, as speculators and hedge funds in bonds are now jumping in the framework of "front running the Fed."

U.S. Treasury bears have always maintained that the U.S. is like Japan, because Japan, unlike most U.S. government Guilt by foreigners such as China, who will one day shed their U.S. Treasury investments if they are out of my head from ballooning debt of U.S. ownership. If this happens, expect the yield, because they have problems in Greece and other European countries with government bonds. Well, this scenario actually happened recently in China sold more than $ 21 billion of long-term U.S. bonds in June 2010 and guess what happened? They were grabbed from domestic customers and> Bond yields continue to fall!

I think the penny is finally beginning to fall, what happens if there is deflation - the quality bonds are still the best investment. Even Alan Kohler, the long-poo, the "deflationeers," he advised his subscribers to Eureka Report this week to buy bonds, poohed case. If Australia has a problem with deflation as well? The stock market is about 25 percent below the 2007 peak result and how the U.S. S & P 500 has gone nowhere in 2010.Since the new restrictions on foreign real estate investors in April 2010 have been announced, property prices seem to have a plateau, and sales have slowed. Do not know about you, but I think deflation is like, if not already here.