Bonds are known as debts, which the government or certain companies assume by loaning money from the public. This is in the form of U.S. Government bonds, corporate bonds, or municipal bonds, among others, and are used and invested in company expansions or government initiatives such as street lighting, infrastructure, and maintenance of government buildings. In exchange, investors receive a fixed interest rate within a specified period. Therefore, people invest in bonds because bonds provide stability in investments, consistent source of income, and security of investment.
Stability is the first thing that investors consider when investing money on bonds. They are predictable sources of income and are less vulnerable to fluctuations unlike stocks. In case there are variations in the amount of the bonds, "it will have little impact on the value of the investment" (InvestorGuide Staff, 2013).
Because bonds are not predisposed to fluctuations in income, income coming from bonds are predetermined and come in the form of consistently defined interest payments. This means investors already know how much they would receive within a given timeframe. Thus, bonds offer regular and predictable income in the form of interests.
Finally, investors consider investments in bonds a secure way of keeping their money safe. Bonds investors are creditors to government or corporations, thus, in cases of corporate or government bankruptcy, the creditors are the first ones paid over the stakeholders or stockholders. In addition, interest rates for bonds are much higher than rates offered by banks when keeping a bank account. This makes adding bonds investments in one's portfolio a good decision.
Although there are plenty of misunderstandings about bonds investment, many people still invest in bonds considering that bonds provide stability in investment profiles, are safe and conservative forms of investment, and offer a steady income especially when other aspects of the economy fail.
Works Cited
InvestorGuide Staff. "Benefits and Risks Associated with Bonds." Investor Guide. Web. 11 May 2013.
Investopedia Staff. "The Advantages of Bonds." Investopedia. Web. 11 May 2013.
