12-17-2019, 02:10 PM
(12-17-2019, 10:03 AM)fenders53 Wrote: I'm not educated enough on purchasing individual bonds. Sounds like it is time to learn. First a more advanced book, then I can dip my toe in the market with a quality corporate bond and watch it move around. Nothing accelerates the learning curve like some skin in the game.
The beauty of holding a non-callable bond until maturity is that it really makes the process quite simple. Instead of having to think of all the different scenarios, you only really need to worry about "how likely is this entity (corporation/government/whatever) to be capable of paying back this amount of money on this particular date." Then calculate the yield-to-maturity and you pretty much have all you need.
You also lock in the profits at the time of purchase so basically once you've pressed the big red buy button, then all you do is wait until maturity. Sometimes you collect the money at maturity, sometimes along the way, in either case it does not matter where the bond price goes because it will be at face value on the expiration date.
But to be honest corporate bonds are at a tough place now. It's hard to find anything even remotely trustworthy that yields significantly more than the government bonds. For all the extra research you do on the company and it's financials, plus the risk of default that you take, it's really hard to find ones that yield enough.
The above is basically for using bonds instead of cash and holding until maturity. I have no idea how bonds work if you plan to use them more as a trading instrument for the potential price appreciation.