We have many ways to multiply our current savings. It is not only safe bank deposits but also investment funds or shares. It is also worth mentioning corporate bonds. What exactly are the bonds of this type and how much can we earn on them?
Savings and investment products are a proposal for anyone who has free cash. Instead of leaving it in an interest-free account, it is worth taking advantage of the offers of banks and non-bank companies offering such products.
Of course, we have to take into account the risk – we choose savings and investment methods so as not to risk too much. Let’s also remember to use different methods – when one of them fails, we can always earn money for others.
What are corporate bonds?
We call corporate bonds corporate debt securities issued by companies. They are, therefore, documents that confirm debt and are similar to Treasury bonds in this respect, but nevertheless, there is a greater risk. On the other hand, high profits are tempting. A person who has corporate bonds can realize them after the specified date, receiving back capital along with the generated profit.
Companies such as joint-stock, limited joint-stock partnerships, and limited liability companies may issue corporate bonds. Then they get the opportunity to collect finances from investors to carry out their projects.
Corporate bonds have:
• specific interest rate – usually from 5% to 11%
• expiry date when the company repurchases the bond from the investor – usually just a few months to several years
• the length of the interest period – it indicates how many months we can get interested – usually, it is 3 months or 6 months
How to invest in corporate bonds?
To buy corporate bonds, we should set up a brokerage account that gives us such a possibility. Usually, we can do it completely online, after logging into your transaction account in the bank. We can also simply use the services of the brokerage office.
Once we are in possession of a brokerage account, we can start buying corporate bonds. Of course, before we decide what to buy, we should familiarize ourselves with companies issuing such bonds. It will be safer to buy bonds of companies listed on stock exchanges.
Specialists can also help us in making initial decisions. We can find many articles and tips on investing in corporate bonds on the Internet.
Why is it worth investing in corporate bonds?
Corporate bonds are an attractive alternative to other investment methods – the investment start-up costs are not very high, while the returns are attractive. When we do not want to risk too much, we can earn up to 6% per year, which is even twice as much as on the best deposits. If we are willing to take a higher risk, then the profit may be as much as 11%.
In addition, the simplicity of this type of investment is a plus, especially when we have a bank account and brokerage account in the same bank along with access via the Internet. Then we can invest in the computer without leaving home.