Function of bond market?


1 Answers

Connor Sephton Profile
Connor Sephton answered
A bond market is a place where bonds are bought, sold, and traded for profit. Almost always, bonds will make money for their investors, since bonds generally offer stable, long-term benefits to those who are willing to wait for bonds to reach maturity. The bond market has one important function - it offers investors a safer way to make "paper" investments, without the potential perils and pitfalls of the stock market, which has the potential for higher gains and much bigger losses.

  • Conservative investment option

Bonds are a staid, conservative, and safe investment, and they can be a wise choice for people who don't have a lot of disposable income to throw around. However, bonds aren't going to make people rich, unless they buy an awful lot of them and hang on to them for 10, 15, or 20-25 years! When you cash in savings bonds before they reach full maturity, you take a financial hit, so this type of investment is meant to be held onto for a very long time before being cashed in.

  • Legacy investments

Often, parents or grandparents will buy savings bonds to tuck away for their children or grandchildren's education. These types of savings bond "legacies" may be augmented by education savings plans that feature riskier mutual fund investments and other types of stock market investments. Balancing a portfolio with different investments at different risk levels can be an excellent way to protect yourself in the event that one type of investment fails.

To get the best out of your investments, study all of the functions of the bond market and decide which types of savings bond investments will give you the features and ROI (return on investment) that you really need. Research and knowledge are very important in the finance game, and those that do their homework will almost always come out ahead.

Answer Question