Fixed Rate Bonds Explained

Most of the time when we think of investment, we think of the stock market. This is the widely reported scoreboard of the economic health of a country. However, there are far more types types of investments than just this. It is also true that there are many types of investments which may be more suitable to different people. We do not all have to be in the stock market in order to see profits on our money.

One of the types of investments that are often overlooked are bonds. These are investments by which an individual purchases the debt of a corporation or government in order to profit from the payments on that debt. The agreement gives the bondholder the right to have their money paid back with a certain amount of interest added on to their investment. The bond is also set to pay out at a certain time in the future. When you combine all of these factors, you can easily see why there are some who would be interested in purchasing bonds over other types of investments.

Fixed rate bonds are a specific type of bond that gives the holder even more security in the investment they are making. This is a type of bond that guarantees a particular rate of interest being paid out on the investment. The amount of time it will take for the investment is also set as well. Therefore, you will be able to lock in the rate that you would like to receive on your money and how long you want to have to wait for it as well.

The one trade off that people make with fixed rate bonds is that the rates offered on these bonds are going to be slightly lower than whatever the going rate in the market is. This lower interest rate is basically the price you pay for the guarantee of a certain percentage return on your investment. For many people, this is completely worth it. After all, they want to be able to guarantee that they will receive payment of a certain amount of money as soon as they possibly can. If they have the fixed rate bonds, then they may even be able to plan out their financial life around the fact that they know that they will be receiving a certain amount of money in the future.

Make sure that you are looking into these types of bonds as potential investments for yourself. Typically those who are nearing retirement are going to be the ones who would most benefit from this kind of low risk, low reward set up. If that sounds like you, then learning about fixed rate investments is a good thing to engage in.