bonds http://www.wisebread.com/taxonomy/term/4414/all en-US Stabilize Your Portfolio With These 5 Bond Funds http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stabilize-your-portfolio-with-these-5-bond-funds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_investment_000058699958.jpg" alt="Woman stabilizing her portfolio with bond funds" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Bonds are low-risk investments that can be used to stabilize your portfolio. You may already be familiar with them. Local cities, states, and the federal government are the biggest issuers of bonds, but corporations will also create bond certificates when they're seeking capital. And although they generally carry lower risk than stocks, as an investor you will still need to decide where your comfort level lies. Do you feel secure with corporate bonds, or do you prefer the assuredness that municipal and treasury bonds have to offer?</p> <p>Fortunately, there are a variety of bond funds that allow you to tailor your investment to your risk tolerance and overall needs. Here are six well-performing bond funds to help stabilize your portfolio. (See also: <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio?ref=seealso">The Most Important Thing You're Probably Not Doing With Your Portfolio</a>)</p> <h2>1. iShares TIPS Bond ETF [<a href="https://www.ishares.com/us/products/239450/ishares-05-year-tips-bond-etf">STIP</a>]</h2> <p>STIP offers exposure to short-term 0-5 years U.S. TIPS, which are government bonds whose value typically rises with inflation. The fund has some growth potential and low volatility. Use it as a short-term hedge against inflation.</p> <ul> <li>Risk: Low</li> <li>Goal: Track index of inflation protected U.S Treasury bonds of less than five years</li> <li>Expense Ratio: .10%</li> <li>Money Manager: BlackRock</li> </ul> <h2>2. iShares National Muni Bond ETF [<a href="https://www.ishares.com/us/products/239766/ishares-national-amtfree-muni-bond-etf">MUB</a>]</h2> <p>Municipalities nationwide fund capital projects with bonds; MUB iShares provides exposure to more than 2,000 U.S. municipal bonds with its top holdings in California and New York, representing 42.97% of its assets. The fund offers tax efficiency for investors in higher tax brackets.</p> <ul> <li>Risk: Moderate</li> <li>Goal: Track index of investment grade U.S. municipal bonds</li> <li>Expense Ratio: .25%</li> <li>Money Manager: BlackRock</li> </ul> <h2>3. Vanguard California Long-Term Tax-Exempt Fund Investor Shares [<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0075&amp;FundIntExt=INT">VCITX</a>]</h2> <p>This fund aims to create federal and state tax-exempt income and appeals to investors in high tax brackets, particularly those residing within the state of California. This is an intermediate-term bond and more susceptible to inflation.</p> <ul> <li>Risk: Moderate</li> <li>Goal: Long-term tax-free income</li> <li>Expense Ratio: .20%</li> <li>Money Manager: Vanguard</li> </ul> <h2>4. Vanguard Total Bond Market ETF [<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0928&amp;FundIntExt=INT">BND</a>]</h2> <p>The BND invests in more than 3,000 broad U.S. investment-grade bonds. The fund has relatively high potential for investment income with some volatility. It is appropriate for mid to long-term investors seeking a reliable income stream. Use it to diversify and balance the risks of stocks.</p> <ul> <li>Risk: Low to moderate</li> <li>Goal: Track U.S. bond market returns</li> <li>Expense Ratio: .09%</li> <li>Money Manager: Vanguard</li> </ul> <h2>5. Vanguard Total International Bond ETF [<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=3711&amp;FundIntExt=INT">BNDX</a>]</h2> <p>With its eyes on the world's bond markets, BNDX employs hedging strategies to protect against uncertainty in exchange rates. The fund offers broad exposure to non-US dollar denominated investment grade bonds. Use it to hedge against inflation.</p> <ul> <li>Risk: Low to moderate</li> <li>Goal: Track Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index</li> <li>Expense Ratio: .20%</li> <li>Money Manager: Vanguard</li> </ul> <p><em>Do you have any bond funds in your portfolio?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive">8 Ways to Prepare for a Stock Market Dive</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-easy-ways-to-start-green-investing">5 Easy Ways to Start Green Investing</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment balancing portfolio bonds ETF municipal bonds risk tolerance stocks Fri, 05 Feb 2016 14:00:04 +0000 Qiana Chavaia 1650901 at http://www.wisebread.com 4 Ways to Reduce Your Tax Bill With Bonds http://www.wisebread.com/4-ways-to-reduce-your-tax-bill-with-bonds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-to-reduce-your-tax-bill-with-bonds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/father_daughter_computer_000082622141.jpg" alt="Man finding ways to reduce his tax bills with bonds" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Financial advisors recommend bonds to investors for portfolio diversification, as a fixed income investment strategy, and to hedge against inflation. Even better, some major bond classes can help you reduce your tax bill, too.</p> <p>What's more, they are low-risk investments. Here's how you can reduce your tax bill with bonds. (See also:&nbsp;<a href="http://www.wisebread.com/9-tax-friendly-ways-to-save-beyond-your-retirement-fund">9 Tax-Friendly Ways to Save Beyond Your Retirement Fund</a>)</p> <h2>1. Invest in Municipal Bonds</h2> <p>Municipal bonds have long garnered the attention of high-earners seeking to minimize their tax obligations. Muni bonds are tax-exempt at the federal level and, in some cases, local and state tax exempt as well, especially if the investor resides in the issuing state or municipality.</p> <p>Though munis faced some scrutiny during the financial crisis, many &mdash; if not most &mdash; munis deserve a second look now that local government finances are on much more stable footing.</p> <h2>2. Buy U.S. Treasury Bonds</h2> <p>U.S. Treasury bonds pay interest income once every six months. That income is exempt from state, local, and the alternative minimum tax. Some treasury bonds can also <a href="https://www.fidelity.com/fixed-income-bonds/individual-bonds/us-treasury-bonds">reduce your tax bill</a>, even if investing outside of a retirement account.</p> <h2>3. Purchase Zero Coupon Bonds</h2> <p>Zero coupon bonds are exempt from state and local tax. As their name suggests, these government bonds pay no interest, but often offer higher yields. Investors beware, however: Zero coupon bonds come with higher risks than their traditional counterparts, so consider the risk-reward trade-offs before investing in this asset class.</p> <h2>4. Put Bonds Inside Tax-Free and Tax-Deferred Accounts</h2> <p>Investors can defer any taxes owed on interest income by delaying distributions and holding these investments in a tax-deferred retirement account, such as an IRA or 401K. Once the money is withdrawn at retirement age, it'll be taxed based on the individual's tax bracket. Using the same strategy, if they are kept in a tax-free account, such as a Roth IRA or Roth 401K, distributions taken at retirement are tax-free.</p> <p><em>Are bonds in your portfolio? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/4-ways-to-reduce-your-tax-bill-with-bonds">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-simple-guide-to-series-i-savings-bonds-i-bonds">A Simple Guide to Series I Savings Bonds (I-Bonds)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-choose-a-roth-401k-or-a-regular-401k">Should You Choose a Roth 401k or a Regular 401k?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive">8 Ways to Prepare for a Stock Market Dive</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Taxes 401 k bonds IRA municipal tax-deferred treasury Tue, 02 Feb 2016 22:00:06 +0000 Qiana Chavaia 1649194 at http://www.wisebread.com The Best Ways to Invest $50, $500, or $5000 http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-best-ways-to-invest-50-500-or-5000" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_holding_cash_000076050947.jpg" alt="Woman finding best ways to invest $50, $500, or $5000" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Investing isn't just for your dad and the super rich folks down the block. Anyone can &mdash; and should &mdash; put a portion of those hard-earned dollars to work. The prospect of reaping additional profits by committing capital to stocks, bonds, mutual funds, real estate, and more might seem sort of scary. But it's an exercise everyone can benefit from &mdash; people with slim pockets included. It's all about weighing potential gains with potential risk, and then zeroing in on an investment vehicle that caters to you.</p> <p>Read on for our <a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">investment guide for the newbies</a> and dabblers. Whether you've got $50, $500, or $5,000 to spare, there's a wealth-growing opportunity waiting for you.</p> <h2>1. $50</h2> <p>Fifty smackers won't make you rich. But that doesn't mean you can't transform a $50 bill into an opportunity to build up your wealth. Often the key to growing small sums is getting creative, so now's the time to channel your inner artist.</p> <p>Why not flip furniture on Craigslist? Think about it: There's a deluge of couches, end tables, stools, and vintage tea carts on the buy-and-sell site. Often, when it comes to furniture listings, one of four things is the case: The seller doesn't know what the item is worth; the seller is moving and just needs to get rid of things quickly; the seller can't take a good photo of a coffee table for the life of him; or the furniture piece needs just a little TLC to realize its potential worth. Here's where you swoop in to remedy the situation.</p> <p>If the seller undersold you a sofa, it's not your duty to inform him that he could have made an arm and a leg rather than $25. Seize this as an opportunity to resell the item you got a steal for at a better price. If the seller has a nice wooden chair, but posted a dim-lit, fuzzy photo of it positioned in the middle of a messy living room overrun with cats, you've just scored yourself a chance to buy the chair and market it in a way that reflects its true worth.</p> <p>Another option for folks with $50 to invest: Build up your savings account. It's not sexy. But if you're able to sock away $50 every once in a blue moon, you'll eventually have a nice little safety net. What's more, you'll be on your way to building up enough money to do some more progressive investing (think bonds and stocks). After all, you've got to have a little to make a little. But you certainly don't need a lot to grow your pot.</p> <h2>2. $500</h2> <p>A $500 investment gives you a little bit more flexibility. While it's hard to grow that amount quickly and substantially &mdash; ahem, unless you've perfected your poker face &mdash; there are lots of ways to make $500 work for you without risking big losses on the betting machines.</p> <p>In fact, you won't wager <em>any</em> losses if you invest in a certificate of deposit. Popularly known as a CD, this special type of deposit account offers a higher rate of interest than a standard savings account. The catch is that you can only deposit money into it for a specified length of time. During that time &mdash; six months, 18 months, two years, etc. &mdash; your fixed investment generates interest, which you can cash out, along with your original $500, when your CD reaches maturity.</p> <p>A CD is a safe investment &mdash; an ideal option for folks amenable to slow growth and low risk. Unlike a savings account, a CD can help prevent you from burning through your hard-earned dollars (but if you're in a jam, you can easily access it for a small penalty). And unlike stocks and many other forms of investment, CDs come with federal deposit insurance, so there's zero risk of losing your money. National rates for a one-year CD currently hover around 1.25% at the moment. Not great, but be sure to shop around.</p> <p>Another great option is hooking up with an online financial advisor. They're truly all the rage. You can open an account with <a href="http://track.flexlinks.com/a.ashx?foid=1029882.1538723&amp;fot=9999&amp;foc=1">Betterment</a>, for example, even if you have no money. (The company recommends a monthly deposit of $100, which is just enough to waive the $3 fee per month for accounts less than $10,000). Dubbed &quot;the easiest investment site you'll ever use&quot; by Slate, Betterment is just one of <a href="http://www.wisebread.com/should-you-trust-your-money-with-these-4-popular-financial-robo-advisers">several robo-advisors</a> offering services that were at one time a privilege of the uber-rich. (Thanks, Internet.) Some of these companies will even make the trades for you, suggest ways to minimize your taxes, and rebalance your accounts. There's more risk involved in investing with an online financial advisor, but there's also more opportunity for gains.</p> <h2>3. $5000</h2> <p>One of the biggest misconceptions about investing is that you need a lot of money to jump in the game. Not so. By sinking $5,000, a relatively modest sum, into a quality mutual fund, you'll gain access to a stock portfolio that's diversified and professionally managed. Another benefit: Investors in mutual funds can cash in their shares at any time, giving you more flexibility should you endure some sort of financial emergency.</p> <p>Sure, there's risk involved. Some of the investments in your portfolio will falter. But others are bound to flourish. Some years will be losers. During others, your earnings might grow by 8%. Bottom line: If you choose a mutual fund that's high-performing, there's ample opportunity to grow your investment into a bigger sum. You've just got to come to terms with that fact that every year won't be a good one. And so, notably, the $5,000 you invest shouldn't be money that you're hoping to spend next year. Rather, view this investment as your pot of gold for sometime down the road.</p> <p>If you're wary of risk, consider investing, say, $3,000 in mutual funds. Then pour the remainder into bonds. Bonds won't bring home the big returns, but they'll give you reliable ones, providing you with a solid footing on which to weather the uncertainty of an investment in stocks.</p> <p>Rome wasn't built in a day, and neither were most sizeable portfolios. Even a modest start is a good start &mdash; and a big step forward toward financial security.</p> <p><em>How have you invested a windfall?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brittany-lyte">Brittany Lyte</a> of <a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-easy-ways-to-start-green-investing">5 Easy Ways to Start Green Investing</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive">8 Ways to Prepare for a Stock Market Dive</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds earnings mutual funds profits stocks windfalls Mon, 04 Jan 2016 14:00:02 +0000 Brittany Lyte 1630352 at http://www.wisebread.com 10 Stocks and Bonds That Will Profit From the Fed Rate Hike http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/interest_rate_increase_000020286301.jpg" alt="Finding stocks and bonds that will profit from the fed rate hike" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The Federal Reserve finally did what it's been hinting at for some time, and raised the target on its benchmark rate by a quarter of a percentage point. It's the first interest rate hike after spending much of the last decade with interest rates near zero.</p> <p>Interest rates are still going to be historically quite low, but some investments may decline in value in the short term. After all, it's the low interest rate environment that has <em>partly </em>fueled the rise in stock prices in recent years.</p> <p>That said, it's still very possible to profit even as interest rates go up. There are some market sectors that love higher rates, and in general, a rise in rates is a signal from the Fed that the nation's economy is healthy. (See also:&nbsp;<a href="http://www.wisebread.com/this-is-how-much-the-feds-interest-rate-hike-might-cost-you">This Is How Much the Fed's Interest Rate Hike Might Cost You</a>)</p> <p>Here are ten investments that might respond well as interest rates go up.</p> <h2>1. SPDR S&amp;P Regional Bank ETF [<a href="http://finance.yahoo.com/q?s=KRE">NYSE: KRE</a>]</h2> <p>When interest rates rise, small banks do quite well because more people are willing to increase their cash holdings. This ETF counts many strong small banks in its portfolio, including Bank of the Ozarks and Great Western Bancorp. This ETF has seen a return of more than 13% over the last year, suggesting that the anticipation of higher rates may already be baked into the price. But it's still worth buying.</p> <h2>2. Wells Fargo [<a href="http://finance.yahoo.com/q?s=WFC">NYSE: WFC</a>]</h2> <p>If smaller banks aren't your thing, then take a look at some big banks. Billionaire investor Warren Buffett owns more shares of Wells Fargo than any other company. New loans made by the bank will benefit from the higher rates, as will any existing variable rate loans. Other big banks worth a look include US Bancorp and BNY Mellon.</p> <h2>3. Schwab Short-Term U.S. Treasury ETF [<a href="http://finance.yahoo.com/q?s=SCHO">NYSE: SCHO</a>]</h2> <p>The conventional wisdom is that a hike in interest rates make long-term bonds less attractive, but short-term bonds perform well. Consider that the yield on a two-year treasury note hit a year high recently. Charles Schwab reported that during the three periods when the Fed rose rates since 1990, short-term bonds were the only sector that saw increases each time. This ETF from Schwab has some of the lowests fees on the market, so it's likely a good buy if you're interested in fixed income investments. The iShares Short Treasury Bond ETF is also well regarded.</p> <h2>4. Apple [<a href="http://finance.yahoo.com/q?s=AAPL">NYSE: APPL</a>]</h2> <p>It's the biggest company in the world. It has a very healthy balance sheet. In a time of raising rates and general uncertainty, it's good to hang with companies that have solid margins, lots of cash, and low volatility. Any blue chip stock with a long track record of steady growth is a good buy in this environment.</p> <h2>5. Alphabet [<a href="http://finance.yahoo.com/q?s=GOOGL">NYSE: GOOGL</a>]</h2> <p>Another one of the largest and most stable companies in the world, most likely unaffected by a rise in interest rates. Investing in Google's parent company can help keep you insulated from any market uncertainty over the next few months.</p> <h2>6. MetLife [<a href="http://www.google.com/finance?cid=664378">NYSE: MET</a>]</h2> <p>There are few sectors clamoring for an interest rate hike more than life insurers. These companies rely on interest income to boost their margins, so they generally have not been fans of the low interest rate environment. MetLife is the a largest company in this sector. Prudential and New York Life are also worth a look.</p> <h2>7. Accushares VIX Index ETF [<a href="http://finance.yahoo.com/q?s=VXUP">NYSE: VXUP</a>]</h2> <p>It's not entirely clear how the markets will react to the news of the interest rate bump, but most observers predict some amount of volatility in the short term. You can capitalize on that volatility by buying shares of this ETF that is based on the most common volatility index. It's an esoteric product, and I wouldn't invest my life savings into it, but it may be one way to capitalize on investor uncertainty.</p> <h2>8. Starbucks [<a href="http://finance.yahoo.com/q?s=SBUX">NYSE: SBUX</a>]</h2> <p>If the Fed is raising interest rates, it's sending a signal that it believes the economy is in good shape. And a strong economy means people are doing well enough to afford discretionary items, including that morning cup of coffee. Starbucks is a leader in the restaurant/food area, and should benefit from a strong economy overall.</p> <h2>9. Mastercard [<a href="http://www.google.com/finance?cid=299286">NYSE: MA</a>]</h2> <p>Goldman Sachs put this credit card company on its list of &quot;quality&quot; stocks worth buying in advance of a rate hike, and its reasoning is sound. If the economy is strong in the Fed's eyes, then it's strong enough for people to be buying more goods and services. Companies like Mastercard do better when people go shopping.</p> <h2>10. Chipotle Mexican Grill [<a href="http://finance.yahoo.com/q?s=CMG">NYSE: CMG</a>]</h2> <p>Shares of this burrito eatery have tumbled in the last few months, in part due the company being linked to cases of <em>e.coli</em> around the country. But assuming that the cases aren't indicative of a larger problem with the restaurant, this is a well-regarded company with a solid balance sheet. Chipotle shares should be poised for a rebound with the Fed showing confidence in the nation's economy.</p> <p><em>Will your portfolio be helped or hurt by the Fed's recent rate increase?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds">5 Crucial Things You Should Know About Bonds</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/laddering-for-higher-more-stable-returns">Laddering for higher, more stable returns</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive">8 Ways to Prepare for a Stock Market Dive</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds borrowing Fed interest rates investing stocks Thu, 17 Dec 2015 12:00:08 +0000 Tim Lemke 1622171 at http://www.wisebread.com 8 Ways to Prepare for a Stock Market Dive http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-ways-to-prepare-for-a-stock-market-dive" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/bronze_piggybank_coins_000017285252.jpg" alt="Learning how to prepare for the next market downturn" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If the stock market downturn in August freaked you out, you may find it helpful to be more prepared for the next time <a href="http://www.wisebread.com/10-signs-a-stock-is-about-to-tank">stocks take a dive</a>. While there's little value in panicking and assuming the markets will tumble, there are certain things investors can do to ease their minds and protect their assets.</p> <p>Consider these eight ways to get ready for the next market downturn.</p> <h2>1. Assess What Money You May Need Soon</h2> <p>If you are investing with some short-term goals in mind, it's worth taking stock of how much money you may need in the near future. For instance, if you have some investments set aside to pay for your child's college and he or she is graduating high school in a few months, it might make sense to withdraw in advance of a drop.</p> <h2>2. Save Up for Some Deals!</h2> <p>There's nothing worse than having great stocks available on the cheap, but not having the cash to buy them. Now's the time to save up so you can pounce when the values are good.</p> <h2>3. Get More Conservative</h2> <p>Anyone approaching retirement age should think about shifting investments from stocks to more stable investments, such as bonds or cash. Hopefully, this is something you've been doing anyway as you've gotten older, but if you believe the market is on the cusp of a dive, it's worth evaluating whether you should accelerate this transition.</p> <h2>4. Take a Look at Gold</h2> <p>Since the dawn of time, gold has been used as protection against disaster. It can be a good investment if interest rates rise, as many people have historically flocked to it during times of geopolitical uncertainty. Gold is cheap right now, so adding some to your portfolio could be a helpful antidote to a market downturn.</p> <h2>5. Prepare a Tax Loss Harvesting Strategy</h2> <p>If you sold investments earlier in the year and are on the hook for capital gains taxes, you may be able to offset those taxes by reporting losses from elsewhere in your portfolio. This is called tax loss harvesting. Now is the time to assess which stocks have dropped in value since you bought them, and which may be poised for a drop. A thoughtful tax loss harvesting strategy will help you avoid capital gains taxes and may even reduce your taxes from earned income.</p> <h2>6. Read Up</h2> <p>A stock market downturn can be a scary thing, in part because it's sometimes hard to discern whether the dip is a result of bad company financials or broader macroeconomic effects at work. This is when it's helpful to study earnings reports and balance sheets to get a good read on a company's health. Armed with knowledge, you'll be able to get a better handle on a stock's true worth.</p> <h2>7. Give Yourself a History Lesson</h2> <p>For many people, the thought of a stock market dive can make them sick to their stomach and keep them up at night. It helps to know that historically, the market always rebounds after decline, often quickly to new heights. Consider that since the end of World War II, the S&amp;P 500 has had a losing year just 15 times, and only three times has there been a decline in consecutive years.</p> <h2>8. Do Nothing</h2> <p>Stock markets go up. They go down. If you are investing with a long time horizon, your investment strategy should remain simple and consistent, and should not change because the market hits a rough patch.</p> <p><em>Are you ready for the next stock market downturn?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-invest-in-the-stock-market">Why invest in the stock market?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-times-you-shouldnt-invest-in-stocks">10 Times You Shouldn&#039;t Invest in Stocks</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds crashes gold market downturn protecting assets saving stocks Wed, 30 Sep 2015 13:00:50 +0000 Tim Lemke 1570336 at http://www.wisebread.com 11 Investment Mistakes We All Make http://www.wisebread.com/11-investment-mistakes-we-all-make <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/11-investment-mistakes-we-all-make" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/buy_sell_dice_000034067732.jpg" alt="People making investment mistakes we all make" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Anyone who has ever made money by investing has probably also made their share of blunders. In fact, it's the blunders along the way that have probably led to some great lessons learned.</p> <p>If you've made <a href="http://www.wisebread.com/9-crazy-investments-of-the-rich-and-famous">mistakes with your investments</a>, you are not alone. Here are some of the most common investing mistakes we all make from time to time.</p> <h2>1. We Have No Plan</h2> <p>We start buying stocks and mutual funds without any real idea of our goals, timeline, or risk tolerance. We trade on a whim, with no sense of how each investment fits with our overall portfolio. Eventually, we'll become more organized and we'll be able to invest with purpose, simplicity, and success.</p> <h2>2. We Buy and Sell at a Bad Time</h2> <p>We've all seen the market go down and have panicked. We unload quality stocks that later rise back up to new heights. We also buy popular stocks at inflated prices, only to see them come back to earth. Over time, we learn that selling high and buying low is a much more profitable approach.</p> <h2>3. We Don't Invest Enough</h2> <p>When we start investing, we are cautious and too conservative. Perhaps we're young and not too thrifty and fail to put enough aside. We don't understand the power of compounding returns over time. We'll kick ourselves when we're 55 because we wish we'd have saved more when we were 25.</p> <h2>4. We're Too Aggressive</h2> <p>We're overloaded on tech stocks and hot biopharmaceutical companies. We go after wacky investments like leveraged ETFs and embrace volatility. We might make money quick, but we're just as likely to lose it fast. We will learn the hard way that slow and steady growth is a more reasonable goal.</p> <h2>5. We're Too Conservative</h2> <p>We're terrified of losing money, so we invest in bonds and cash, even though we're 35 years from retirement. We get giddy over a 2% return from a CD. Over time we will learn that it's impossible to get rich without taking some calculated risks.</p> <h2>6. We Don't Pay Attention to Fees</h2> <p>We buy a mutual fund or ETF because we think it's in line with our investment goals, but fail to notice that we're losing a full percent or more from expenses. There are management fees, account fees, transaction fees and a variety of other costs that are passed onto us, eating into our investment returns. Eventually, we'll learn to find those solid, well-performing funds and ETFs with super-low expense ratios.</p> <h2>7. We Don't Pay Attention to Taxes</h2> <p>We're ignorant of the advantages of Roth IRAs, which allow us to see investments grow tax free, and 401(k) plans, which let us defer taxes on investments and reduce our taxable income now. We're oblivious to the impact of capital gains taxes, buying and selling frequently in taxable accounts. Eventually, we'll become more tax savvy and our investments will rise in value faster.</p> <h2>8. We Don't Pay Attention to Commissions</h2> <p>We buy and sell shares of stock frequently, unaware that we may be paying big bucks to a stock broker when we could trade online for less than $10 a trade. But even when we do discover a discount broker, we buy and sell so often and just a few shares at a time, so even small commissions make a dent in our portfolio. We will learn over time to buy and sell with more money so that commissions don't have the same impact &mdash; or to find investments that trade commission-free.</p> <h2>9. We Watch Too Much TV</h2> <p>We are initially mesmerized by the financial pundits on CNBC and other financial news networks. We act on every stock tip from Jim Cramer and every piece of speculation about what the Fed will do. Soon, we'll learn to separate the sound analysis from the noise, and have confidence in our own ability to execute a long-term investment strategy.</p> <h2>10. We Check Our Investments Too Often</h2> <p>We watch the day-to-day performance of the markets, and allow the ups and downs impact our emotions. We see a stock dip 2% in a day and feel like punching a wall. We see it rise 3% and want to throw a party. We will conclude that this is no way to live, and will instead feel content checking in once a week, or so.</p> <h2>11. We Forget to Rebalance</h2> <p>We think we have a great investment plan, with a solid mix of stocks in various sectors and asset classes. It's all set up for optimal returns, except that we fail to pay attention as the investment mix goes off kilter. Now we're too heavily invested in one sector and don't have enough exposure in another. This offers the lesson that just because our contributions are invested a certain way, doesn't mean they'll end up that way. Rebalancing our portfolio at least once a year will help us stay on track.</p> <p><em>What are you doing to correct your investing mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-to-invest-in-biotech-without-getting-burned">7 Ways to Invest in Biotech Without Getting Burned</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-easy-ways-to-start-green-investing">5 Easy Ways to Start Green Investing</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds ETFs investing mistakes mutual funds stocks Wed, 23 Sep 2015 13:00:22 +0000 Tim Lemke 1561525 at http://www.wisebread.com 10 Ways Bonds Can Hurt Your Portfolio http://www.wisebread.com/10-ways-bonds-can-hurt-your-portfolio <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-ways-bonds-can-hurt-your-portfolio" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_reading_newspaper_000047347788.jpg" alt="Man learning how bonds are hurting his portfolio" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Bonds and bond funds can be an integral part of most portfolios. Not only can they can bring some stability to help guard against big losses, but in some cases they can also generate a healthy return.</p> <p>But bonds can also be a drag on your portfolio if you're not thoughtful about what you're buying. The key is to understand what you want to accomplish with bonds, and invest only in those that make sense for you and your investment goals. Paying attention to taxes and fees is also crucial.</p> <p>Here are 10 ways that bond investing may be sapping the energy from your portfolio.</p> <h2>1. You Are Investing in Too Many</h2> <p>If you're young, you don't need a heavy dose of bonds, as their generally lower returns can be a drag on growth. Bonds help stabilize a portfolio, but young people have a long time horizon to make up losses, and can afford to be more stock-heavy in their investments. Consider scaling back your bond exposure to 15% or less, or even none at all.</p> <h2>2. Your Bonds Are Not Good Bonds</h2> <p>Sometimes you choose a bond or <a href="http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds">bond fund</a> because it's what's offered in your 401(k) plan, or because someone recommended it. But is it actually a quality investment? Did you do your research to see if you can get into something better? Look to resources like <a href="http://www.morningstar.com/">Morningstar</a> for ratings on bond investments, historical performance, management, and fees.</p> <h2>3. Fees</h2> <p>Some bond funds may take 1% or more in management and other fees. There's not a lot of evidence that high fees will result in better investment performance. Look for funds that have low expense ratios of a half-percent or less, such as the <a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0084&amp;FundIntExt=INT">Vanguard Total Market Bond Index Fund</a>.</p> <h2>4. Taxes</h2> <p>If your bonds are in a taxable brokerage account, it may be best to get tax-free municipal bonds to save on that tax bill. Interest on most corporate bonds is taxed at the ordinary income rate, but you may be able to avoid taxes if you choose municipal bonds. Consider placing any taxable bond investments in a tax-advantaged retirement account, such as Roth IRA or 401(k).</p> <h2>5. Your Bond Selection Is Too Conservative</h2> <p>If you are close to retirement, you may be best investing in a stable bond fund without much volatility. But if you are younger, you're going to want some growth, too. You might be best off with a high-yield bond fund, which carries more risk but the potential for greater returns. Don't let fear prevent you from taking a little risk. If you're years away from retirement, you can afford to be a little more aggressive.</p> <h2>6. Your Bond Selection Is Too Risky</h2> <p>If you are on the cusp of retirement, you may want to focus on stable value bond funds and other bond investments that don't come with a lot of volatility. Avoid bond funds comprised of low quality bonds. Don't buy municipal bonds from cities on the verge of bankruptcy. Look for bonds with a track record of avoiding losses even during the rough times.</p> <h2>7. You Have Too Many Bond Funds and Not Enough Actual Bonds (Or Vice Versa)</h2> <p>Many people don't see a material difference between investing in bonds versus bond mutual funds. It's tempting to invest in bond mutual funds because of the diversity of bond exposure, but with individual bonds, you'll get all of your principal back as long as you hang onto it through maturity. Bond funds, on the other hand, have no maturity date and could drop in value. There are pros and cons to holding each, so it makes sense to have a mix, if you can.</p> <h2>8. You Have Too Many Long-Term Bonds</h2> <p>If you invest in shorter term bonds, you won't be impacted as much as interest rates rise. The last thing you want is to be locked into a low rate for years and years. With talk of interest rates rising, it's important to remember that interest rates and bond prices move in opposite directions. Longer term bonds will see price drops that are bigger than short-term bonds.</p> <h2>9. You Have Too Many Short-Term Bonds</h2> <p>Short-term bonds are a good way to hedge against interest rate hikes. But long-term bonds tend to have higher returns. If you're not seeing the kind of performance you want from your portfolio, it could be that you are too focused on short-term bonds.</p> <h2>10. You're Not Diversified Enough</h2> <p>If you're not thoughtful about your bond investing, you may find yourself holding many of the same kinds of bonds unnecessarily. There's no need to own shares of several bond funds with similar holdings and philosophies, for instance. And be careful not to invest in a mutual fund that holds bonds that you also own individually.</p> <p><em>Are bonds helping or hurting your portfolio?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/10-ways-bonds-can-hurt-your-portfolio">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike">10 Stocks and Bonds That Will Profit From the Fed Rate Hike</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/laddering-for-higher-more-stable-returns">Laddering for higher, more stable returns</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-simple-guide-to-series-i-savings-bonds-i-bonds">A Simple Guide to Series I Savings Bonds (I-Bonds)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-reduce-your-tax-bill-with-bonds">4 Ways to Reduce Your Tax Bill With Bonds</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bond selection bonds corporate bonds interest rates municipal bonds yields Mon, 21 Sep 2015 13:00:37 +0000 Tim Lemke 1561388 at http://www.wisebread.com How to Build an Investment Portfolio for Under $5000 http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-build-an-investment-portfolio-for-under-5000" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/financial_growth_000016805229.jpg" alt="Man learning to build investment portfolio with under $5000" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're relatively new to investing, you might find the number of investment options mind boggling. Moreover, it's not easy to know how much money to place in which types of investments.</p> <p>To help simplify things, let's pretend we have $5,000 to place in a retirement account. The investment mix presented here should be a good guideline for someone looking for growth over the long term. It's not too aggressive, but will allow for a steady increase in retirement savings over the course of many years.</p> <p>You'll note that there are no individual stocks in this portfolio. Instead, there's a heavy focus on mutual funds and ETFs that can give you exposure to a broad mix of stocks.</p> <p>Feel free to adjust your mix depending on your age and risk tolerance, and don't forget to re-balance <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio">your portfolio</a> once a year so you're staying on track.</p> <h2>$2,000: Total Market Fund or ETF</h2> <p>Every portfolio needs a solid foundation. To get exposure to a wide range of U.S.-based stocks, start by placing a good portion of your money in a mutual fund or exchange-traded fund that seeks to replicate the performance of the entire stock market. I am partial to iShares Total Market ETF [<a href="https://www.ishares.com/us/products/239724/ishares-core-sp-total-us-stock-market-etf">ITOT</a>], and also like Vanguard's Total Market Index ETF [<a href="http://finance.yahoo.com/q?s=VTI">VTI</a>]. Spartan's Total Market Index Fund [<a href="https://fundresearch.fidelity.com/mutual-funds/summary/315911404">FSTMX</a>] is also a good choice. These investments usually have very low expense ratios and can often be traded without a commission, depending on the broker. (Disclaimer: I own all three of the aforementioned in various accounts.)</p> <h2>$1,500: International Equity Index Fund or ETF</h2> <p>To reduce risk, it's important to have some of your money diversified across geographies. Consider putting at least 30% of your money into international equities, which give you exposure to some of the largest companies in Europe, Asia, South America, and even Africa.To get broad exposure to international markets, consider an ETF such as the iShares Total International Stock ETF [<a href="https://www.ishares.com/us/products/244048/ishares-core-msci-total-international-stock-etf">IXUS</a>], or Vanguard's Total International Stock Index Fund [<a href="http://www.morningstar.com/funds/XNAS/VGTSX/quote.html">VGTSX</a>]. If you want to become more diversified in international stocks and take advantage of growth in emerging markets, consider mixing in iShares Emerging Markets ETF [<a href="https://www.ishares.com/us/products/239637/ishares-msci-emerging-markets-etf">EEM</a>] or something similar.</p> <h2>$500: Small Cap Stock Fund or ETF</h2> <p>One of the downsides of investing in a total market fund is that you won't get a lot of exposure to smaller companies. Small companies may have more growth potential than other investments, so it's good to have some in your stock portfolio. The Small Cap Value Fund [<a href="http://www.morningstar.com/funds/XNAS/PRSVX/quote.html">PRSVX</a>] from T. Rowe Price is a good performer, as is Fidelity Advisor Small Cap Growth Fund [<a href="http://finance.yahoo.com/q?s=FCPVX">FCPVX</a>].</p> <h2>$250: Mid Cap Stock Fund or ETF</h2> <p>This is another way to ensure your portfolio isn't too geared to larger companies. Mid cap companies are not too big, not too small, but can offer some nice growth. There are many good ways to get involved with mid caps, but take a look at the SPDR S&amp;P 400 Midcap Growth ETF [<a href="https://www.spdrs.com/product/fund.seam?ticker=MDYV">MDYV</a>], or the Schwab U.S. Midcap ETF [<a href="http://www.morningstar.com/etfs/ARCX/SCHM/quote.html">SCHM</a>].</p> <h2>$250: Real Estate</h2> <p>A complete portfolio should have some real estate exposure, and fortunately there are some easy ways to get into that game without going out and buying an apartment building. Real Estate Investment Trusts allow individual investors to access everything from Class A commercial real estate to hospitals and condominiums developments. Look at the Vanguard REIT Fund [<a href="http://finance.yahoo.com/q?s=VGSIX">VGSIX</a>] to get started.</p> <h2>$500: Bonds</h2> <p>It's good to invest in some bonds as a hedge against risk, and you may even want to ramp this figure up as you get closer to retirement. Vanguard's Total Bond Market Index Fund [<a href="http://www.morningstar.com/funds/XNAS/VBMFX/quote.html">VBMFX</a>] and similar funds will give you exposure to a wide range of corporate and government bonds.</p> <p>This use of $5,000 should give you a well-diversified and balanced portfolio. As you gain confidence and knowledge, don't be afraid to mix in some other investments, including commodities like oil and gas, or precious metals like gold and platinum. Also consider adjusting your exposure to certain business sectors, such as technology, health care. and financials. But most of all, be patient and keep an eye on your long-term goals.</p> <p><em>How have you structured your portfolio?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-to-invest-in-biotech-without-getting-burned">7 Ways to Invest in Biotech Without Getting Burned</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-easy-ways-to-start-green-investing">5 Easy Ways to Start Green Investing</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio">The Most Important Thing You&#039;re Probably Not Doing With Your Portfolio</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds ETFs mutual funds portfolios stocks Mon, 13 Jul 2015 13:00:10 +0000 Tim Lemke 1484692 at http://www.wisebread.com 9 Safe Investments That Aren't Bonds http://www.wisebread.com/9-safe-investments-that-arent-bonds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/9-safe-investments-that-arent-bonds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_holding_piggy_bank_000021177412.jpg" alt="Man making safe investments that aren&#039;t bonds" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>So you have a good nest egg built up and you want to protect it. Bonds are a popular choice for those looking for stability, but these days, they are being viewed with more skepticism as interest rates may soon be on the rise.</p> <p>What to do? There are plenty of other places to put your money with relatively low risk. Consider these investments that offer predictable returns and some peace of mind for investors.</p> <h2>1. Cash</h2> <p>I know, it's boring. But if you truly don't want to see your nest egg decline, there are worse things than placing your money in a bank. Interest rates are near historic lows, so you won't be getting much of a return, but inflation is also pretty low right now, so cash isn't really losing value, either. To get a <em>slightly </em>higher return than a run-of-the-mill savings account, consider looking into certificates of deposit, some of which allow you to withdraw money without penalty.</p> <h2>2. REIT Stocks</h2> <p>Shares of real estate investment trusts, or REITs, can be a stable part of an investment portfolio because they're known for high dividends (though not necessarily growth in share value). REITs are a way for <a href="http://www.wisebread.com/the-3-best-books-to-start-investing-today">an individual investor</a> to have real estate in their portfolio without needing to buy property. They are furthermore required to pay out all of their taxable income in the form of dividends. This makes them a great option for income investors, though it's still important to diversify your portfolio to protect against a crash in the real estate sector (like we saw in 2008). Remember that REIT dividends also count as ordinary income for tax purposes.</p> <h2>3. Lending Club</h2> <p><a target="_blank" href="http://track.linkoffers.net/a.aspx?foid=22948877&amp;fot=9999&amp;foc=1" rel="nofollow">Lending Club</a> is an increasingly popular investment vehicle that allows an individual to invest in other people's debt. You can build a portfolio of loans based on your own risk tolerance, and there's a good chance you'll make money because Lending Club only approves applications from borrowers with solid credit. Lending Club claims that 99% of account holders with more than 100 notes earn positive returns. (See also: <a href="http://www.wisebread.com/everything-you-need-to-know-about-peer-to-peer-investing-with-lending-club?ref=seealso">Everything You Need to Know about Investing with Lending Club</a>)</p> <h2>4. Your Electric Company</h2> <p>Investing in utilities such as your electric provider will historically bring you steady, if unspectacular, returns. Generally, utilities pay above-average dividends and are a reliable bet because they provide products and services that we all use. If you are unsure of what specific companies to invest in, consider buying into the Vanguard Utilities Index Fund (VPU) or the iShares US Utilities ETF (IDU).</p> <h2>5. Annuities</h2> <p>There are many different types of annuities, but most of them operate on the principle of paying out a steady stream of income for a set period of time &mdash; or even the rest of your life. Some annuities are designed to give you maximum payments each month, while others are designed to offer additional tax-deferred savings if you've already maxed out your other retirement contributions.</p> <h2>6. Preferred Stock</h2> <p>Shares of preferred stock can go up and down just like common shares, but offer some advantages for those looking for more stability. Generally, preferred stocks offer a fixed dividend, and owners of these have priority over the owners of common shares if a company goes bankrupt. If you're interested in preferred stock, but unclear on what company to invest in, consider a mutual fund or ETF, such as the iShares U.S. Preferred Stock ETF.</p> <h2>7. Consumer Goods</h2> <p>Everyone needs food and clothing. And our economy is built on the idea of people buying stuff, after all. That's why if you invest in consumer goods, you'll probably see a steady and solid investment return even when the rest of the stock market is all over the place. Companies like Procter &amp; Gamble are good bets, or you could invest in a vehicle such as the iShares Dow Jones U.S. Consumer Goods Sector Index Fund (IYK.)</p> <h2>8. Health Care and Pharmaceuticals</h2> <p>People aren't getting any younger, and Americans are going to need health care regardless of the economic environment. The Vanguard Health Care Fund (VGHCX) has generated a 13% return over the last decade and nearly 30% over the last year. Companies like Johnson &amp; Johnson and Pfizer have been some of the most reliable performers in the stock market for decades.</p> <h2>9. The Broader Stock Market</h2> <p>Yes, the conventional wisdom is that you should avoid investing in equities if you want to protect your assets. But there is an argument to be made that investing in the S&amp;P 500 is as safe an investment as anything else. Consider that the value of the S&amp;P 500 has risen every year in the last decade, except for one (2008). In fact, since 1980, the market has <a href="http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html">brought positive returns</a> in all but six years. Investing in index funds or ETFs such as the iShares Total Market ETF is anything but a risky move.</p> <p><em>What alternatives to bonds do you use to provide stable returns?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/9-safe-investments-that-arent-bonds">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive">8 Ways to Prepare for a Stock Market Dive</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-times-you-shouldnt-invest-in-stocks">10 Times You Shouldn&#039;t Invest in Stocks</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment annuities bonds cash equity stocks Wed, 03 Jun 2015 11:00:10 +0000 Tim Lemke 1438346 at http://www.wisebread.com The Most Important Thing You're Probably Not Doing With Your Portfolio http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-most-important-thing-youre-probably-not-doing-with-your-portfolio" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/calculations_000028679096.jpg" alt="Business man doing calculations" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Life changes, and so do financial markets. That's why it's important to periodically examine whether your portfolio still reflects your financial goals. &quot;Rebalancing&quot; is simply the process of bringing your portfolio's assets back to their original, planned percentage-mix of investment types. The reason for this is that some investments appreciate, while others depreciate over time, creating a different balance than you may have intended.</p> <h2>Why Rebalance?</h2> <p>One investing rule of thumb is that stock and bond prices move in opposite directions. Let's say you're 35, and allocate 65% of your portfolio to stocks and 15% to bonds. The economy is moving along nicely and you have a good year in the stock market and by the end of it, stocks represent 75% of your portfolio. This asset mix is out of alignment with your goals! To bring it back into balance, you will need to sell the over-weighted asset (stocks in this case), and purchase the under-weighted asset &mdash; bonds. This realigns your portfolio with your investment objectives.</p> <h2>How Often, How Far, and How Much: How Frequently Should You Rebalance?</h2> <p>There are three rebalancing strategies. How often you choose depends on whether you're still saving and re-investing the dividends, or retired and taking withdrawals.</p> <h3>Time Strategy</h3> <p>For a systematic approach, investors can follow the time-table strategy. This can be daily, monthly, quarterly, yearly, or whatever works. With this approach, it will not matter how far away your assets deviate from your goals. The only variable impacting your rebalancing decision is time. Of course, which frequency you choose should be determined based on your time horizon, risk tolerance, diversification strategy, and the costs to rebalance.</p> <p>But the average investor doesn't have the time nor resources for a daily &mdash; or even monthly &mdash; rebalancing strategy, and most of us choose less frequent rebalancing..</p> <h3>Threshold Strategy</h3> <p>With the threshold strategy, the one thing that will trigger a rebalance is deviation away from your target goals by a definitive amount, say 3%, 5%, or 10%. Deciding on this strategy could require daily, monthly, or quarterly rebalancing, or it may be that you won't need to rebalance for five, 10, or 15 years. Again, your investment goals should help you determine whether this strategy is appropriate for you.</p> <h3>Hybrid: Time and Threshold</h3> <p>Here, both the time and threshold strategies guide your decision to rebalance.</p> <p>You will rebalance your portfolio on a periodic time-table, but only if your assets deviate from your goals by a pre-determined amount. Therefore, if you reach your time schedule and your assets are below the threshold, you would not rebalance. Likewise, if your assets exceed the threshold, but you haven't reached the scheduled rebalancing date, you will wait to rebalance.</p> <p>For the average investor, rebalancing too frequently could result in higher tax costs (from selling assets) and added transaction fees. But many experts suggest taking a hard look at least once a year at whether your portfolio's asset mix still matches your intended goals.</p> <p><em>How often do you rebalance your portfolio?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive">8 Ways to Prepare for a Stock Market Dive</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-times-you-shouldnt-invest-in-stocks">10 Times You Shouldn&#039;t Invest in Stocks</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds portfolios rebalancing stocks Thu, 07 May 2015 11:00:07 +0000 Qiana Chavaia 1412613 at http://www.wisebread.com 10 Times You Shouldn't Invest in Stocks http://www.wisebread.com/10-times-you-shouldnt-invest-in-stocks <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-times-you-shouldnt-invest-in-stocks" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_stocks_000030689114_0.jpg" alt="Woman considering when she shouldn&#039;t invest in stocks" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Investing in stocks is one of the best ways to build wealth over time, since on average, the stock market returns 9% per year. But there are many instances when buying stocks might not make sense. If you're on the fence about whether to enter the stock market, ask yourself if any of these apply to you.</p> <h2>1. You're About to Retire</h2> <p>If you are right on the cusp of retirement and need to rely on your savings when you stop working, it's best to avoid riskier stocks and place it in safer investments, such as bonds or cash. Most experts recommend that bonds and safer investments should comprise the same percentage of your portfolio as your age. So, a 65-year-old investor would want about 65% of their portfolio in bonds and lower-risk investments, and only 35% in stocks (which tend to be higher-risk). The last thing you want is for your nest egg to rapidly decline in size right as you plan to dip into it.</p> <h2>2. You Need the Money Right Away</h2> <p>Investing in stocks isn't really for people looking to make a quick buck. Sure, you might make 10% in one month, but you might also lose just as much. If this is cash you need soon for a new car, down payment on a home, or a new child, you're best off keeping it somewhere safer and more liquid.</p> <h2>3. You Haven't Researched the Most Tax-Advantaged Ways to Invest</h2> <p>It's relatively easy to buy individual stocks, but have you explored buying these via tax-advantaged accounts, such as a Roth IRAs and 401(k)s? If not, you may find yourself owning stocks in regular brokerage accounts, meaning you'll be on the hook right away for any taxes on dividends and capital gains. Do a little bit of homework on tax-advantaged vehicles before you invest, and you'll end up saving thousands of dollars in the long run.</p> <h2>4. You Don't Have an Emergency Fund</h2> <p>Investing in stocks is a great way to build wealth, but it doesn't really make sense to put money in the markets if you have no cash savings. Before you invest, work to ensure that you have enough liquid savings to cover at least three months of expenses, so that you're not financially crippled by a job loss, major medical expense, or other crisis.</p> <h2>5. You Freak Out Over Market Fluctuations</h2> <p>It's a simple fact that markets go up and down. There may be days you'll lose hundreds &mdash; or even thousands of dollars. Can you stomach this? If you're losing sleep over a single day's losses, perhaps you're not ready for stock investing. Before jumping in, take some time to get acquainted with the movement of markets. Becoming comfortable with the ups and downs will make you a more patient and happier investor.</p> <h2>6. You Can Only Invest a Very Small Amount at a Time</h2> <p>When you buy and sell stocks, you will usually pay a commission on each trade. This costs less than $10 at most discount brokerage firms, but if you only plan to buy a few shares of stock, that could add up to a big chunk of your return. Generally speaking, it's more efficient to buy larger quantities of shares, if you can. (There are some caveats to this. Many brokerage firms offer commission-free trades on many investments, so it's possible to buy small numbers of shares. But your choices are limited.)</p> <h2>7. You Have a Lot of High-Interest Debt</h2> <p>If you have thousands of dollars in credit card debt and are paying 13% in interest, is it wise to place your money in stocks? Sure, there may be stretches of time where investment returns are higher than your interest rates, but most of the time you are better off using money to pay down debt. In the long run, eliminating debt will free up more money to invest, putting you in better financial shape.</p> <h2>8. Stock Valuations Are Completely Insane</h2> <p>I am not a believer that you should always &quot;sell high&quot; and &quot;buy low.&quot; If you are investing for the long haul, it's not worth stressing over whether you're getting into the markets at the right time. Young investors, in particular, are best off just getting started as soon as they can. That being said, there may be instances when there is broad agreement that stocks are overpriced based on a company's earnings, or other factors. In these cases, it might make sense to wait for the market to cool a bit before pouncing. Pay close attention to things like a company's price-to-earnings ratio, and how close a stock price is to a 52-week high.</p> <h2>9. Interest Rates Start Shooting Way Up</h2> <p>Right now, interest rates are still historically quite low, but there have been instances when interest rates were so high that you'd end up with better returns from your savings account than the S&amp;P 500. If economic conditions suggest interest rates might rise dramatically, it might make sense to hold off on investing in stocks. It's worth noting, however, that interest rates have been quite low for many years now, and that past predictions of rate jumps didn't materialize.</p> <h2>10. You Really Have No Idea</h2> <p>It may seem like everyone is telling you to invest. But you just have no idea how to get started or what to do. That's okay! If you're unfamiliar with investing, you're more likely to make a mistake that will cost you money. Ignore outside pressure and take the time to learn about the stock market and the mechanics of investing before putting your money at risk.</p> <p><em>Have there been other occasions in which stocks weren't the right choice for you?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/10-times-you-shouldnt-invest-in-stocks">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-prepare-for-a-stock-market-dive">8 Ways to Prepare for a Stock Market Dive</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-safe-investments-that-arent-bonds">9 Safe Investments That Aren&#039;t Bonds</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment bonds debt emergency funds retirement saving stocks Wed, 22 Apr 2015 15:00:09 +0000 Tim Lemke 1392474 at http://www.wisebread.com 5 Easy Ways to Start Green Investing http://www.wisebread.com/5-easy-ways-to-start-green-investing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-easy-ways-to-start-green-investing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_recycling_000013114340.jpg" alt="Woman happy because she made environmentally friendly investment" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We'd all love to invest our money in a way that benefits our finances while helping to build a better world. If that sounds like a pipe dream to you, it's not. Impact investing is a growing trend, and there are plenty of ways to do well and do good with your money. Here are five classes of green investments that are kind to the Earth:</p> <h2>1. Green Bonds</h2> <p><a href="http://www.institutionalinvestor.com/gmtl/3382260/Green-Bonds-Planting-Seeds-for-Eco-Friendly-Investment.html#.VRmawpPF-l0">Green bonds</a> are a perfect entry point for someone interested in making a social investment. Like other bonds, you pay a certain amount of money for the bond now to get a larger amount of money at a specific future date. With green bonds, your up-front investment is used to finance environmentally friendly projects. They're relatively low-risk and provide critical funds that are urgently needed in the short-term for these green initiatives.</p> <h2>2. Green Mutual Funds</h2> <p>Chances are that if you have any type of retirement account, at least a portion of it is invested in mutual funds. If you'd like to use that money to support green projects, choose green funds when allocating your investments. Broadly speaking, these investments are also included under the umbrella of socially responsible investments.</p> <h2>3. Green Stocks</h2> <p>As an investor, you also have the option to invest directly in companies that have a green mission, product, or service. This means you can buy stock in a publicly traded company that produces renewable energy products such as solar panels, or any other &quot;green&quot; mission of your choice.</p> <h2>4. Green Startups</h2> <p>One of the riskiest (but perhaps one of the most potentially lucrative) green investments you can make is in a green startup. There are plenty of entrepreneurs who are founding companies in the environmentally-friendly space. They range from new composting techniques, to energy-saving products, to innovative concepts such as carbon credits that are bought and traded to compensate for energy consumption.</p> <h2>5. Sustainable Product Stocks</h2> <p>Many companies are taking up the green mantle by transforming their products and using renewable resources. Some also pledge a portion of their earnings to environmental nonprofits, and support green efforts in the communities where they operate. These companies can contribute enormously to protecting the environment, and supporting their efforts with your investment dollars and purchases can help encourage them to continue and enhance these practices.</p> <p>As always, it's important to make informed investment decisions. It's best to educate yourself about these options by reading about the ins and outs of green investing. I also suggest seeking the advice of a professional financial advisor before making any investment decisions. Together, we can build a bright future for ourselves and for the planet as a whole through our investment dollars.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christa-avampato">Christa Avampato</a> of <a href="http://www.wisebread.com/5-easy-ways-to-start-green-investing">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-ways-to-invest-50-500-or-5000">The Best Ways to Invest $50, $500, or $5000</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-build-an-investment-portfolio-for-under-5000">How to Build an Investment Portfolio for Under $5000</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio">The Most Important Thing You&#039;re Probably Not Doing With Your Portfolio</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-reasons-to-start-investing-in-bonds-now">The 5 Best Reasons to Start Investing in Bonds Now</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Green Living Investment bonds eco-friendly environment mutual funds startups stocks sustainability Wed, 15 Apr 2015 11:00:12 +0000 Christa Avampato 1380916 at http://www.wisebread.com 5 Crucial Things You Should Know About Bonds http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-crucial-things-you-should-know-about-bonds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_000039524102.jpg" alt="crucial things you need to know about bonds" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Be honest: How much do you actually know about bonds? If you're stammering for an answer, here's your chance to raise your bond IQ. For starters, bonds are an essential part of every investor's toolkit. They can provide stable returns to help offset volatility in other parts of your portfolio. (See also: <a href="http://www.wisebread.com/the-5-best-reasons-to-start-investing-in-bonds-now?ref=seealso">The 5 Best Reasons to Start Investing in Bonds Now</a>)</p> <p>Depending on how old you are, you may not own many bonds right now, but you likely will someday. It's important you at least understand the basics.</p> <h2>1. A Bond Is an &quot;I Owe You&quot;</h2> <p>Shakespeare famously wrote, &quot;Neither a borrower nor a lender be.&quot; Apparently, he knew a lot about personal finance (it's definitely best to go easy on the borrowing), but not so much about investing. When you buy bonds, that actually makes you a <em>lender</em>, and this form of lending can be a very good thing, especially as we get older.</p> <p>When a corporation or government (the two most common issuers of bonds) sells you a bond, it promises to repay the money at a specified future date (known as the bond's &quot;maturity date&quot;). Along the way, it also promises to pay you a fixed interest rate at regular intervals.</p> <p>Bond issuers use the tool to raise money for their operations. For example, when a local government needs to put in a new $3 million sewer system, it might sell $3 million worth of bonds to pay for the pipes. In essence, it's a way for them to borrow money, possibly for a longer time frame and at a lower interest rate than would be available to them through other means.</p> <p>You, as a buyer of the bonds, get a fairly safe investment with a known interest rate that is typically higher than you could get through <a href="http://www.wisebread.com/12-places-to-keep-your-money-safe-and-growing">other low-risk investments</a>, such as CDs.</p> <h2>2. Bonds Are Relatively Safe</h2> <p>If you read past Shakespeare's more famous phrase, you'll find this warning, &quot;&hellip;For loan oft loses both itself and friend.&quot;</p> <p>As safe as they may be, bonds do come with a risk of financial loss. The two main risks are credit risk and interest rate risk.</p> <h3>Credit Risk</h3> <p>A bond issuer's promise to repay is only as good as the issuer's financial strength. U.S. government bonds are safe as can be. If our country gets in financial trouble, it can just print more money. A start-up company's bonds? Not nearly as safe.</p> <p>If the issuer of the bond you bought goes out of business, you'll be out the money. That's what's meant by credit risk. You can manage this risk by buying highly rated bonds. Two companies rate the financial strength of bond issuers: Moody's, and Standard and Poor's. Bonds from the most credit-worthy organizations carry a AAA rating. Those with the worst ratings carry a C rating. The better the rating, the safer the bond. The downside is that the interest paid by the safest bonds is typically less than that paid by the lowest rated bonds.</p> <h3>Interest Rate Risk</h3> <p>The other type of risk associated with bonds is interest rate risk. When interest rates rise, the value of an already-issued bond falls. Think of it this way: If newly available bonds are offering a higher interest rate than your bond, why would someone buy yours? You'll have to offer it for less than you paid for it in order to attract a buyer. Of course, for buyers of individual bonds, this only matters if you plan to sell the bond before it matures. Otherwise, you'll still get back what you paid for your bond when it matures as well as the promised interest.</p> <h2>3. Bonds Exist to Lower the Risk of Your Portfolio</h2> <p>One of the most important principles in successful investing is <em>asset allocation</em>. This refers to how you divide your investment dollars across different asset classes, and the two most important asset classes are stocks and bonds. Stocks tend to be riskier than bonds, and over time they tend to generate better returns. When you're young, you have time to ride out the market's ups and downs, so an all- or mostly-stock portfolio is usually the way to go. As long as you can handle the ride, it will typically generate a better long-term return than a more conservative portfolio. (See also: <a href="http://www.wisebread.com/2-investing-concepts-everyone-should-know?ref=seealso">2 Investing Concepts Everyone Should Know</a>)</p> <p>As we get older, we can't afford to take as much risk, so it's best to reduce the amount of stocks in our portfolio, replacing them with lower-risk investments, such as bonds. Bonds are designed to lower the risk of your portfolio, smoothing out the ups and downs. The trade-off is they will also typically lower your overall returns.</p> <h2>4. The Easiest Way to Buy Bonds Is Through a Bond Fund</h2> <p>You can buy individual bonds, but it takes time to research the best ones and build an adequately diversified bond position in your portfolio. A much easier way is to buy bond mutual funds. Such funds are inherently diversified.</p> <p>All of the major fund companies offer bond funds, and you'll find many different types to choose from. There are corporate and government bonds; short-term, intermediate-term, and long-term bonds; domestic and foreign bonds, and more.</p> <p>You can also buy funds that contain a mix of stocks and bonds, such as target-date funds, which have become a common and popular option in 401(k) and other workplace plans. Such funds come with preset stock/bond allocations, based on how long an investor has until he or she plans to retire.</p> <p>They also automatically change that allocation over time, shifting away from stocks and toward bonds as the investor gets older. Target-date funds are far from perfect, but they do offer one of the easier ways to manage the use of bonds in your portfolio.</p> <h2>5. Boring Can Be Beautiful</h2> <p>Some people think of bonds as boring, and owning bonds certainly isn't as exciting as owning Tesla stock. But the older we get, the more the steady, low-risk income produced by the bonds become a thing of beauty.</p> <p><em>Do you own bonds? Why or why not?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike">10 Stocks and Bonds That Will Profit From the Fed Rate Hike</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-401-k-is-not-an-investment">Your 401(k) is not an investment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stabilize-your-portfolio-with-these-5-bond-funds">Stabilize Your Portfolio With These 5 Bond Funds</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/trading-options-is-a-sound-investment-and-its-simpler-than-you-think">Trading Options Is a Sound Investment (and It&#039;s Simpler Than You Think!)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investment-mistakes-we-all-make">11 Investment Mistakes We All Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment asset allocation bond fund bonds investing stocks Thu, 05 Mar 2015 14:00:07 +0000 Matt Bell 1317214 at http://www.wisebread.com 6 Smart Ways to Use Old Savings Bonds http://www.wisebread.com/6-smart-ways-to-use-old-savings-bonds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-smart-ways-to-use-old-savings-bonds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/savings-bonds-Dollarphotoclub_2278220.jpg" alt="savings bonds" title="savings bonds" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Still hanging on to those old savings bonds your grandparents bought for you when you were a kid? If so, you're probably wondering what to do with them and how much they're worth.</p> <p>Savings bonds are debt securities issued by the U.S. Treasury Department. If you own paper bonds, they are likely Series E, EE, or Series I Bonds, which in the past 30 years earned roughly 3.5% to 7.5%. If you're interested in calculating the face value of your bonds, use the <a href="http://www.treasurydirect.gov/BC/SBCPrice">Treasury Direct online calculator</a>. Or, use the <a href="https://www.treasurydirect.gov/indiv/tools/tools_treasuryhunt.htm">Treasury Hunt tool</a> to determine if you were ever the beneficiary of a bond you don't know about. (See also: <a href="http://www.wisebread.com/receiving-your-tax-refund-in-savings-bonds?ref=seealso">Receiving Your Tax Refund in Savings Bonds</a>)</p> <p>Once you know what they're worth, here's what you can do with your old savings bonds.</p> <h2>1. Hang on to Them Until the Maturity Date</h2> <p>Savings bonds were designed for long-term savings, so if you don't need the money now, you should hold on to your bonds until they mature before cashing them in. The maturity date is at least five years from the date of issuance and up to 30 years (the maturity is listed on your bonds). However, Series E/EE Bonds can be redeemed after one year and Series I Bonds after just six months. The early redemption penalty for cashing them within the first five years is forgoing the last three months of interest.</p> <h2>2. Convert Them to Electronic Savings Bonds</h2> <p>As of 2012, paper bonds are no longer available. Using <a href="https://www.treasurydirect.gov/indiv/research/indepth/smartexchangeinfo.htm">TreasuryDirect's Smart Exchange</a> you can convert your old paper bonds into electronic bonds by simply following the getting started resources on the website. This allows you to keep track of and manage your bonds online, plus it enables you to make any future bond purchases easily electronically. And it'll save you some time and hassle in the future when you choose to redeem your bonds.</p> <h2>3. Cash Them in and Invest</h2> <p>The best thing you could do is put your money straight back to work for you. After cashing in your bonds, reinvest the capital in the stock market. If your bonds are less than 30 years old and are still earning interest, they are likely underperforming the average annual stock market return. But unlike stocks, bonds are low-risk investment. To minimize some risk while still taking advantage of the stock market, consider investing in ETFs and mutual funds through your Roth IRA.</p> <h2>4. Pay for College, a Certificate, or Vocational Training</h2> <p>Cash in Series EE and Series I bonds issued after 1989 to pay for qualified education expenses, and you won't pay income tax on earnings. Educational expenses include all tuition and fees, including room and board, course materials, and other fees. Expenses can be for yourself, a child, spouse, or relative.</p> <h2>5. Locate Tax Records</h2> <p>If you were the recipient of a savings bond with or without a parent or grandparent listed as the beneficiary, to avoid income tax on accrued interest, the co-owner may have filed a federal income tax return for you as a child, in order to report investment earnings. And, because you were a child who did not cross the earned income threshold for filing a return, no tax would be due. Upon redemption of your savings bonds you would only owe tax for the current year's accrued interest.</p> <h2>6. Convert Them to TIPS</h2> <p><a href="https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm">Treasury Inflation Protected Securities (TIPS)</a> are exactly what they sound like: Bonds designed to keep pace with inflation. Unlike the traditional savings bonds you may be holding, their value adjusts with the inflation rate, so that their worth is not eroded over time. Selling your traditional bonds and using the proceeds to acquire TIPS, instead, might protect your capital better from inflation.</p> <p><em>Do you have old savings bonds? How do you intend to use them?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/6-smart-ways-to-use-old-savings-bonds">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-simple-guide-to-series-i-savings-bonds-i-bonds">A Simple Guide to Series I Savings Bonds (I-Bonds)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/optimize-your-ira-and-401k">Optimize Your IRA and 401(k)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/plan-for-your-wants">Plan for your wants</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-post-really-suk-kuks-examining-islamic-finance">This Post Really Suk-kuks: Examining Islamic Finance</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-savings-tricks-you-havent-tried-yet">5 Savings Tricks You Haven&#039;t Tried Yet</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bonds investments savings savings bonds treasuries Tue, 30 Dec 2014 14:00:13 +0000 Qiana Chavaia 1274851 at http://www.wisebread.com The 5 Best Reasons to Start Investing in Bonds Now http://www.wisebread.com/the-5-best-reasons-to-start-investing-in-bonds-now <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-5-best-reasons-to-start-investing-in-bonds-now" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/us-bonds-470563411-small.jpg" alt="us bonds" title="us bonds" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Everyone talks about investing in stocks, but smart investors do not ignore bonds. Read on, and maybe you'll agree that it's high time you start bonding with bonds thanks to these five basic bond benefits. (See also: <a href="http://www.wisebread.com/4000-8000-or-even-453500-in-5-years-a-low-risk-investment-plan?ref=seealso">A Low-Risk Investment Plan</a>)</p> <h2>1. Diversification</h2> <p>Bonds can increase your financial safety by diversifying your portfolio because <a href="http://www.bloomberg.com/quote/INDU:IND">stocks</a> are <a href="http://finance.yahoo.com/q/bc?s=%5EVIX+Basic+Chart">prone to volatility</a> while <a href="http://www.bloomberg.com/quote/BUSC:IND">bonds </a>tend to be more stable.</p> <p>By holding bonds, in addition to stocks and other investments, you're not putting all your eggs in one basket. Although stocks can go up, they can also go down &mdash; sometimes a lot.</p> <p>Plus, <a href="http://wiki.fool.com/When_Do_Stock_&amp;_Bond_Prices_Move_in_Opposite_Directions%3F">bonds often do better</a> when stocks are doing badly. While stocks represent ownership in companies, bonds are essentially loans. Governments, utilities, and companies issue, or sell, bonds when they want to borrow money. When you buy a bond, you're lending money to them. The values of the two investments are based on different factors. In times of uncertainty, investors flee stocks and buy safe, high-quality bonds. In times of economic growth, investors typically buy stocks but increasing interest rates can push bond prices down.</p> <h2>2. Steady Income</h2> <p>Bonds can provide consistent income, a great benefit for retirees. Unless the borrower defaults, investors will be paid, typically twice a year. On the other hand, companies are under no obligation to pay stock owners a dividend.</p> <h2>3. Liquidity</h2> <p>Most bonds, especially those of large companies and the U.S. government,&nbsp;offer liquidity, meaning they can easily be converted to cash. Popular bonds can easily be sold if the investor needs the money for another purpose and wants to cash out.</p> <h2>4. Legal Protections</h2> <p>Bond holders are more likely than stock investors to get their money back if a company goes bankrupt. In a bankruptcy court, bond investors have priority over shareholders in claims on the company's assets. Structured bonds get first priority over unsecured and subordinate bonds.</p> <h2>5. Tax Benefits</h2> <p>Some government bonds offer tax benefits, especially beneficial for high-income earners in states with high income taxes. Interest from municipal bonds, or &quot;munis,&quot; is not subject to federal taxes. And investors generally don't pay state or local taxes on interest from municipal bonds in their own state.</p> <h2>And Now for the Risks</h2> <p>Bonds are attractive for the reasons noted above, but they are not without risk.</p> <h3>Interest Rate Risk</h3> <p>Rising interest rates pose a risk to all types of bonds. When interest rates go up, the value of bonds go down. That's because investors prefer to buy new bonds with higher yields, rather than older bonds with lower rates.</p> <p>Detractors say interest rate risk is a major risk. If rates rise and you sell a bond, you will lose money. But remember if you keep the bond until its maturity, you continue getting interest payments and then get your principal back as expected as long as the issuer doesn't default.</p> <h3>Default or Credit Risk</h3> <p>Default or credit risk is the risk that the company or city (remember Detroit?) could go bankrupt and not make payments. Naturally, companies regarded as riskier pay higher rates, while those seen as safer, like the U.S. government, pay lower rates. Investors can gauge default risk by examining ratings from credit rating agencies like <a href="https://www.spratings.com/">Standard &amp; Poor's</a> and <a href="https://www.moodys.com/">Moody's</a> and mitigate risk by creating a diversified portfolio.</p> <h3>Fun With Funds</h3> <p>Since most people don't have enough money to buy a slew of bonds, they instead <a href="http://www.marketwatch.com/story/how-to-choose-a-bond-fund-1306503164924">buy bond mutual funds</a>, frequently through employer-sponsored 401(k) plans that allow them to commit small amounts over time. These funds offer professional management and diversification by pooling the money of many investors.</p> <p>For your first bond fund, experts typically recommend a <a href="http://individual.troweprice.com/public/Retail/Mutual-Funds/Domestic-Bond-Funds/Benefits/Choosing-the-Right-Bond-Fund">blended fund</a> holding a mix of different types of bonds, such as government, corporate and international bonds, and bonds with a range of maturities.</p> <p>Don't just jump on a fund with the highest yield. That probably means it's highly risky. You don't need to completely avoid risk, but it's important to know what you're getting into.</p> <p>Look at the fund's credit risk by checking the percentage of AAA bonds it holds versus lower-rated and non investment-grade bonds.</p> <p>Longer duration means greater sensitivity to interest rate risk.</p> <p>Most importantly, consider its <a href="http://www.sec.gov/answers/mffees.htm">fees and expenses</a>, including back-end redemption fees.</p> <h3>A Few More Bond Basics</h3> <p>You know the benefits, you know the risks. But before you get out your checkbook, you should also understand some essential facts and definitions about bonds and what determines their value. Knowing about coupon rates, maturities, yields and prices, and how they are inter-related, is key to understanding the investments.</p> <p>The <em>coupon rate</em> is the interest rate the bond issuer (the borrower) pays the investor (the lender).</p> <p>The <em>maturity</em> is when the bond term ends and investors get their principal back &mdash; in other words, when the loan ends. Bonds maturing within five years are considered short-term bonds. Those maturing in 10 years or more have long terms.</p> <p>Because of changing interest rates, when bonds trade they frequently sell at <em>premium</em>, or more than its face value, or at a <em>discount</em>, or less than its face value.</p> <p>Bond prices are expressed as a percentage of its face value, also called <em>par value</em>. For instance, one with a par value of $1,000 selling for 90 is worth $900.</p> <p>The <em>nominal yield</em> is the same as the coupon. But the <em>current yield</em>, a more important figure, is the yearly interest divided by what the investor paid for it. For example, a $1000 bond with a coupon rate of 5% that was purchased at a discount of 90 would have a current yield of 5.5%.</p> <p>And finally, <em>yield to maturity</em>, a more advanced calculation, is used to compare different bonds. It takes into account the bond's price and assumes it's held until maturity.</p> <p><em>Have you added bonds to your portfolio?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/michael-kling">Michael Kling</a> of <a href="http://www.wisebread.com/the-5-best-reasons-to-start-investing-in-bonds-now">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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