INVESTMENT ACCOUNTS » Investing Money

Understanding bonds and bond prices is an essential aspect of making this type of investment. There are a number of elements to take into consideration when choosing bonds to purchase, but one that stands out is looking at what they are correlated to and how this affects your investment.

Making the Correlation


So if you’ve ever taken a look at bond prices, you probably have noticed that in a column nearby is mention of a yield. The yield represents the relationship between the bond’s dollar price and its cash flows (the interest payments and return on your principal amount that you receive throughout and at the end of your term, respectively). So basically, you’re looking at how the dollar is moving in relation to the type of returns you’ll gain for the term period you’ve agreed to.

Since 2006, those who fund their retirement portfolios through their company have a new option: Roth 401k plans. These plans are a great way for higher-earners to contribute to their long-term savings plan as there are no salary limits. Contributions to a Roth 401k plan are made after taxes, and there is no future tax penalty upon withdrawal as long as some basic Roth 401k rules are followed.

Before you choose to participate in Roth 401k, you should know this:

Checking accounts and savings accounts are the first steps towards building financial independence. As time goes on and more money is earned through career advancements, it becomes more important to increase the sophistication of your portfolio. If you have some extra money that you do not expect to need for a few years, you should consider managed funds.

When it comes to investment strategies there are different routes you can pursue at any given time. They are:

Cash is tight these days and many people may be considering a trade in services in lieu of monetary transactions. This kind of thinking is similar to a payment-in-kind or PIK loan, however, the major difference is that the payer will get the identical goods and services in return. The philosophy behind a PIK loan is the use of goods or services instead of a cash payment. PIK loans do not typically provide any cash flow from borrower to lender, thus making it a costly and risky financial tool to use.

Specialty fund managers tend to work with PIK loans to increase the possible profitability of their investment. The loans are typically unsecured, meaning they have no financial collateral backing. The maturity time for PIK loans is generally about five years and during that time there is no cash flow relationship between the borrower and lender.

Investing in certificates of deposit (CD) is a powerful wealth-building strategy. CDs are safe since most are insured by the FDIC, and although their returns are not spectacular, they’re still decent enough to be an attractive investment for those who don’t want to take on a lot of risk. Many people will often name a beneficiary to their CDs using the payable on death option: a spouse or partner, family member or relative, or even a charity that is dear to their heart. There can be a conflict however, when the deceased has a separate will that allocates all assets to a different beneficiary.

True CD Beneficiary

In good times and bad, everyone wants to make as much money as they possibly can. More money means more choices, more security, and more freedom. By making money we expand our world. In that same spirit, we want to put that money to work for us so that we don’t have to worry about our financial future. We do this by investing. Many people invest in certificates of deposit, or CDs. CDs are a type of promissory note, sold by banks and other kinds of financial institutions, that guarantee us a return on our investment through an interest rate applied to the amount of the CD. Certificates of deposit are issued in what is known as the primary market.

The term “primary market” refers to the place where securities, such as certificates of deposit, savings bonds, and stocks, are offered for the first time. They are offered on the primary market by their issuer, such as a corporation, or a bank. The primary market is where securities such as these make their first debut, so to speak. In the case of CDs, they can be purchased in the primary market, but they can’t be sold in it. The primary market, also referred to as the New Issue Market, is where sellers of security meet their investors. It’s the way companies and governments raise money for their needs.

Everyone hopes to never be faced with bankruptcy. In fact, our financial budgeting, responsibilities and everyday behaviors are meant to ensure it never happens. However, all it takes is a lost job or a failed investment and suddenly it’s a slippery slope from cash and comfort to financial disparity.

With a lack of income, yet a need to make payments on everything from mortgage to your mode of transportation, sometimes your final option before foreclosure is to file for bankruptcy.

Many people not familiar with the financial industry can be confused with all the arcane jargon, terms, and concepts that are used by experts. Two terms that are often mentioned are “commodities” and “stocks.” These two separate terms refer to two of the most common financial products sold in the world. Read on for more information on commodities and stocks.

Commodities refer to basic, fundamental goods that are considered to be of equal worth regardless of their producer. A commodity can be a barrel of oil or a bushel of wheat, or a crop of oranges. Again, the key to understanding what a commodity is is to remember that it is a resource good. The quality of these commodities is established by market bureaus which regulate their sale. For example, the trade and sale of many agricultural commodities is regulated and standardized by the Chicago Board of Trade.


A stock, on the other hand, is a certificate or document that proves ownership of a share in a corporation. It is also called a security. When you buy a stock, you are purchasing a tiny sliver of ownership in a corporation. When the corporation makes a profit, it may choose to pay you, the shareholder, a percentage of that profit – call a dividend. There are two kinds of stocks, preferred stocks and common stocks. Common stocks allows you to have voting rights in the company’s leadership, while preferred stocks don’t let you vote but will pay you dividends before those who hold common stocks.

Treasury bonds are a part of a collective known as “treasuries” that are offered by the government, as well as the Treasury Direct System, which allows you to participate in incremental treasury auctions. There are some basics that you should know about the Treasury Direct System. To learn more about it – and treasuries in general – let’s take a closer look at what they all are.

What Are Treasury Bonds?

When purchasing bonds, it is essential that as an investor you understand bond prices. And while the concept is not very simple to wrap your mind around, it cab be learned. So let’s explore what bond prices are and most importantly, what they mean to you as an investor.

Understanding Bond Prices

The first thing you should know about bond prices is that they mean much more than simply listing a rate related to your bonds. They actually go as far as to forecast future economic activity, as well as future interest rates. In other words, they’re pretty important. So how are bond prices determined? They represent a percentage of the bond’s principal balance (also known as par value or loan amount). So for instance, if you see a bond quoted at 99-29 ¾ for a two-year bond, and you were to buy a two-year $10,000 bond, you would pay a starting price of $9,992.97 to receive your full payout at the end of two years. The 99 in the number is called the “handle,” and the 29 ¾ is called the “32nds.” To figure how those numbers calculated your price, they must be converted into percentages. To do this, you would first divide the “32nd” value by 32 (29.75 / 32 = .9296875) then add the “handle” to this value. This equals 92.9296875%, which would then be multiplied by $10,000 to make $9,992.96875, or $9,992.97.