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Can someone explain bonds to me?

Discussion in 'Investing Strategies' started by MoneyNotorious, 31st Aug, 2019.

  1. MoneyNotorious

    MoneyNotorious Member

    12th Mar, 2018
    Hi everyone,

    So I have spent the last year and a half working on stocks and strategies to invest in stocks and on the hunt for dividends. So far so great and I have come a long way since my introduction on InvestChat last year.

    But one thing I bypassed since starting my investing journey was bonds. I have no clue how these work and I keep getting confused because I over analyze everything and lose myself in information.

    Is face value of $100 given at the end plus your coupon?
    How do you work out your quarterly (or annually) income stream?
    Is it on a per bond basis like shares?
    Are you just getting back what you paid for them?

    So many questions and I'm sorry, but I like things dumbed all the way down to ABC levels when understanding things.
    twisted strategies likes this.
  2. twisted strategies

    twisted strategies Well-Known Member

    3rd Nov, 2013
    excellent questions !!!

    please keep in mind i am an amatuer at bonds ( and corporate debt in general )

    PLEASE double check all i say

    NORMALLY the face value is $100 ( but there are some exceptions )

    i buy mine ( when i do ) on market ( like a share or LIC ) via my share trading platform that way i can buy them when they are less than $100 and closer to maturity ( and when the previous holder is more nervous than i ) ( and the amount i want to invest at the time )

    PLEASE note the return of the face value ( and last interest payment ) is common but NO WAY guaranteed , it could be the face value is discounted ( less than face value , interest payments delayed or abandoned and the maturity date extended .. meaning your cash is tied up longer in a turkey say like Greek bonds )

    please learn about the various levels of security DON'T blindly trust credit agency ratings ( a lot of stuff on offer is unsecured and virtually junk debt )

    add some thinking to that over analysis and you will probably do fine

    i have almost completely exited this area of investing currently ( i had a lot of fun between 2011 and 2015 ) to my mind the risk exceeds the reward potential ( especially the way Greece and Cyprus debt holders were treated )