What is a Bond?
Bonds are debt instruments used by companies and private entities, as well as governments (or even groups of governments) of different countries. They are used to acquire capital (money) usually for a definite purpose.
Imagine that the government of a country wants to build an important and expensive project, for example, a railway. The government can issue bonds that companies or individuals can voluntarily purchase. This way, the government is getting money to build the railway. On the other hand, the people, companies or institutions that acquire bonds will be able to receive their money with profits at the time of redeeming their bonds.
Bonds are debt instruments used by governments and businesses to acquire financing while providing profits to their investors.
In general, bonds are fixed-income assets, which means that the return on investment is usually known in advance. This means that the final profit usually can be determined at the end of the term of the bond.
Who can buy bonds?
There are two types of markets for buying and selling Bonds. In the primary market, we generally find banks, credit institutions, brokerage houses and other financial institutions, who usually acquire the bonds directly from their issuer. In some occasions also an individual can participate in the primary market.
The secondary market handles the purchase and sale of the bonds that were acquired in the primary market. For example, when a bank or mutual fund invites the public to invest in smaller amounts. These “small” contributions are usually pooled together and participate jointly in a bond investment. This opens the possibility for all people to participate in these investment instruments.
Currently, also there is a lot of interest in a different type of market. There is a large number of people and institutions that are interested in acquiring Historical Bonds, not because of their monetary value (for the vast majority of these debts, their collection period has already expired) but rather because of the historical value of the documents. Therefore, many people try to acquire old Bonds that they use to collect, speculate or resell in different markets.
At IRVE Antiques we specialize in buying and selling bonds and historical documents. We have a large stock of Bonds from different countries and dates that we ship to our customers worldwide. You can consult our complete catalog by clicking HERE.
What are the risks of investing in Bonds?
In any type of investment there are risks. In general, there is a directly proportional relationship between the amount of risk and the profits that it is possible to acquire. The risk is evaluated depending on which institution is the one that issued the bond. For example, the government of an economically stable country can issue bonds with very low risk, but also with a lower interest rate. On the other hand, a newly formed company could issue bonds with very attractive interest rates, but with a high risk that this new project could fail and it could not be possible to pay creditors.
If you want to invest in bonds, specialists recommend diversifying your investment between the different degrees of risk, and investing in high-risk bonds only the capital that you can afford to lose. In this way you will not risk all your assets.