Sunday, July 12, 2009

Investing in Bonds

One way to make money from investing is to invest in bonds. Here in Canada we used to be able to buy bonds like 20 yrs ago that paid a rally high rate of return like 12% etc but now it has all gone to crap and it's less than 5% annual return. What is a bond you ask?

It is a debt security which is kind of like a debt to a friend. You are essentially lending money to whomever you buy the bond from which could be the government or a company. Whoever sells you the bond is the issuer. The issuer agrees to pay you interest on the money you lend them and then buys them back when they mature.

Investing in bonds is a good way to diversify your portfolio.