1. 25 Investments: Introduction
  2. 25 Investments: American Depository Receipt (ADR)
  3. 25 Investments: Annuity
  4. 25 Investments: Art and Collectibles
  5. 25 Investments: Bonds
  6. 25 Investments: Cash
  7. 25 Investments: Closed-End Investment Fund
  8. 25 Investments: Common Stock
  9. 25 Investments: Convertible Bonds
  10. 25 Investments: Corporate Bond
  11. 25 Investments: Futures Contract
  12. 25 Investments: Life Insurance
  13. 25 Investments: The Money Market
  14. 25 Investments: Mortgage-Backed Securities
  15. 25 Investments: Municipal Bonds
  16. 25 Investments: Mutual Funds
  17. 25 Investments: Options (Stocks)
  18. 25 Investments: Exchange-Traded Funds
  19. 25 Investments: Preferred Stock
  20. 25 Investments: Private Equity
  21. 25 Investments: Real Estate & Property
  22. 25 Investments: Real Estate Investment Trusts (REITs)
  23. 25 Investments: U.S. Treasury Securities
  24. 25 Investments: Unit Investment Trusts (UITs)
  25. 25 Investments: Venture Capital
  26. 25 Investments: Zero-Coupon Securities
  27. 25 Investments: Conclusion

Corporate Bonds are a specific type fixed income securities.  They have the same features of bonds above, but are issued specifically by a corporation.  They are also commonly issues as callable bonds, which gives the corporation that issued them the ability to buy them back.  This would be done if interest rates have declined and they can call them back in and reissue debt at a lower interest rate. 

 

Objectives and Risks

 

Corporate bonds that most individual investors buy are unsecured.  That means that they are not backed by any particular asset or collateral.  This can be significant in the case of bankruptcy.  Bond backed by assets, such as more senior bank debt, or mortgage backed securities, can have a higher rate of recovery during liquidation or restructuring.

 

How to Buy or Sell It

 

Just like bonds in general, individual investors can buy corporate bonds from the same brokers that buy and sell stocks.  But supply is not as high, and bonds come in a wide array of shapes and sizes (based off of bond ratings, maturities, coupon rates, and terms.  Rather than trading commissions, brokers make their money off bid/ask spreads, or the difference between what they buy them from investors at and what they sell them to investors at. (To learn more, see the Corporate Bonds.)

 

Strengths

 

Income, and principal back at maturity

Income is an obligation of the underlying company

 

Weaknesses

 

Low inflation protection

Illiquid investments

Performance depends on underlying company

 

Key Considerations

 

Liquidity:  Low

Historical Returns:  Medium

Inflation Protection:  Low


25 Investments: Futures Contract
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