What is the link? Where have you heard of bonds? It is a financial investment channel among similar channels such as Forex, securities, etc. Bonds are classified as debit instruments. So, is the return on investment in bonds high or not? Let’s go Blog Thien Minh discover!
What are bonds?
In the bond market, there are 2 objects:
Bond issuer (borrower)
+ lender (bond holder)
Bond investing means that the issuer will pay the bondholder an amount over a fixed period of time fixing both principal and interest on the maturity date.
Who is the issuer of the bond?
The subjects that can emit are usually the government, the government, an organization (bank) or a company.
The meaning of the relationship between the issuer and the owner (bond) is a debtor – a bondholder, that is, the creditor is not allowed to participate in the business activities of the company, this form is slightly opposed to the form of investment. equity investment.
The profits generated by bond investments do not depend on the profit and loss situation of the company (fixed income).
In the event of accidental bankruptcy of the company, the bondholder will be subject to priority compensation first, then the shareholders.
Bond formation factors
Denominations
This is the face value printed on the bonds issued, each bond you spend to buy will represent the amount the issuer will have to repay to the creditor (bond holder) at maturity, if you choose to receive interest in each period, i.e. also the basis for calculating fixed income securities.
Nominal interest rate
It is a concept related to the maturity of a bond from the date of purchase by the holder of the bond, the longer the maturity date, the higher the nominal interest rate. pupil.
Interest payment term
Normally, bond issuers must pay interest to bond buyers on an annual basis or at least every 6 months (remember that the longer the maturity, the higher the interest rate).
Factors Causing Bond Market Volatility
For financial investment channels, strongly influenced by external factors, obligations are also inevitable. Factors that affect bonds are often due to the law of supply and demand:
Inflationary: the mere expectation of inflation causes the price of fixed income securities to depreciate significantly, so many people will have to be compensated in the future by the need to raise the interest rate on these bonds.
Market interest rate: capital flows tend to concentrate in places where interest rates are high, assuming that bank interest rates are higher than bond rates, investors will invest their deposits in banks and then bond prices will decline. let’s see interest rates related to forex brokers with other investment channels.
Capitalization of the issuer: When a bondholder holds a bond, they usually choose places that are reputable and highly liquid when interest is due. If the TP distributor does not have enough economic power or is unstable, it will not attract many participants.
Exchange rate: This will mainly affect bonds paid overseas, assuming the USD is higher and appreciates more strongly than GBP, bonds that need to be paid in USD will be higher than GBP.
So, do you understand what a bond is? Bond investing, although less profitable than currency investing, seems more stable. If you are a get-rich-quick investor who wants to take risks, you can choose a Forex channel to play. see more how to invest effectively in small forex.
