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
Related Articles
  1. Investing

    Corporate Bonds: Advantages and Disadvantages

    Corporate bonds can provide compelling returns, even in low-yield environments. But they are not without risk.
  2. Investing

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  3. Investing

    U.S. Corporate Bonds: The Last Safe Place to Make Money

    There aren't many other sources right now for relatively safe, steady income.
  4. Investing

    Six Biggest Bond Risks

    Bonds can be a great tool to generate income, but investors need to be aware of some pitfalls and risks to holding corporate and/or government securities.
  5. Investing

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  6. Investing

    An Introduction To Corporate Bond ETFs

    Learn about the pros and cons of these specialized ETFs, and get in on the opportunities they can provide.
  7. Financial Advisor

    Advising FAs: Explaining Bonds to a Client

    Most of us have borrowed money at some point in our lives, and just as people need money, so do companies and governments. Companies need funds to expand into new markets, while governments need ...
  8. Investing

    5 Fixed Income Plays After the Fed Rate Increase

    Learn about various ways that you can adjust a fixed income investment portfolio to mitigate the potential negative effect of rising interest rates.
Frequently Asked Questions
  1. Is it possible for a country to have a comparative advantage in everything?

    Learn whether one country can have a comparative advantage in everything and what the difference between comparative advantage ...
  2. What's the difference between publicly- and privately-held companies?

    Privately-held companies are owned by the company's founders, management, or private investors. Public companies are owned ...
  3. What Are Short-Term Investment Options?

    If you only have a short period of time in which to invest your money, there are several short-term investment options you ...
  4. What are leading, lagging and coincident indicators?

    Leading indicators move ahead of the economic cycle, coincident indicators move with the economy, and lagging indicators ...
Trading Center