So you want to invest in a 401(k) or IRA. There are so many elements to investing that it’s hard to keep them all straight. If you’re looking to keep your investments on the safe side, then you should look into bonds. Many consider bonds one of the safest investments available when it comes to your portfolio. While diversification is important, and you should also invest some money in stocks, the more bonds you invest in the safer your money will likely be in a struggling economy.

First, consider investing in several different bonds through several different issues. This is the most important element in protecting your investment. If you were to put all of your money into one bond from one issuer, then you run a much higher risk of losing your money if that issuer cannot meet its obligations. Spreading your money over several issuers means much less lost if one of them goes under.

If you just want to earn interest on the money you already have, then buy bonds and hold them to maturity. This provides you with interest during the lifetime of the bond and payment in face value of the bond when it matures. You won’t feel it if interest rates go up and bond values take a bit of dip. It will, however, keep you from investing the principal of the bond when interest rates are low.

If you’re looking to maximize your income, then consider using the “buy and hold” strategy with long-term bonds. Again, the changes in interest rates will not affect the bond overall, and a longer term means that there is more payout to you by the time the bond matures.

Risky types can invest in high-yield bonds offered by companies with lower credit ratings. They pay out more, but have a higher risk of no payment at all because of the company’s financial situation.

Tags: Investment, Stocks and Bonds

This entry was posted on Sunday, April 18th, 2010 at 1:50 pm and is filed under Advice, Parenthood. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.