Archive for April, 2015

In today’s blog would like to briefly look at Corporate Bonds and High Yield Bonds, what they are and the basics of investing with them. For anyone interested in investing in corporate bonds, this should be some good information to get you started. Enjoy.


What are Corporate Bonds exactly?

Corporate bonds, which are also known as simply corporates, are in effect a debt obligation that is issued by either a private or public corporation. You can think of them like an IOU issued by a company. In most cases corporate bonds are issued in either multiples of $1000 or $5000, and the funds that companies raise when they sell bonds to the public are used for a wide variety of different purposes. In most cases the funds are used to expand the business somehow, from building larger facilities to purchasing new equipment and so forth.

When an investor purchases a bond, they are basically lending money to the company or organization that issued the bond and, in return, that company or organization promises to pay that money back (the principle) on a specific date (the maturity date).

Until the maturity date arrives, the company will also pay the investor a specific rate of interest, and usually pay it semiannually. Two very important things to note when you consider investing in bonds is that;

1) Any interest that you receive from your corporate bonds is taxable.

2) Unlike investing in stocks, you do not have an ownership interest in the company or corporation when you purchase bonds.


High Yield Bonds

When it comes to issuing corporate bonds, there are a number of credit rating agencies that rate the companies and organizations who wish to do so. Those include Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings.

When these credit rating agencies rate companies and find them to be excellent, they qualify for what’s called an “investment-grade” rating. That’s a good thing because it means that the chance the company will default and not pay back the bondholders is very low.

On the other hand, if a company doesn’t qualify for an investment-grade rating (because they have a higher chance of default) these companies are forced to pay a higher interest rate in order to attract investors. The higher interest rate compensates investors for the fact that they are taking on more risk by purchasing their bonds.

You’ll find many organizations issuing high-yield bonds, even US corporations, banks and oftentimes foreign governments as well.

Be sure to come back soon as we’ll be featuring more information about Corporate Bonds in a future blog articles.

What are the Benefits of Investing in Bonds?

Today in the United States investors have a variety of choices in the bond market, including US government bonds, asset-backed securities bonds, high-grade corporate bonds, municipal bonds and also high-yield bonds. But what are the benefits of investing in bonds? In today’s blog we’ll take a look at exactly that. Enjoy.

First, an investor can enhance their current income with high-yield bonds. This is especially true when interest rates are on the decline. Astute investors will focus on the difference between the yields on, for example, high-yield bonds as well as the yields on US treasuries. This is called a “yield spread” and, during almost all of the 1980s and 1990s, the yield spread was between 300 and 400 basis points (i.e. 3% to 4%) for securities that had a comparable maturity. There is an increased risk however, so you need to be willing to accept the trade-off for higher yields.

Bonds give you capital appreciation potential. Things like upgrades, improved earnings reports, a company merges or gets acquired or they have positive product developments can reward the investor with an increase in their high-yield bond’s price.

Security is also an added benefit of investing in bonds. For example, if a company is liquidated, bondholders are more likely to get a payment than stockholders because they have priority in the capital structure of the company. In fact, even an investor who holds a low rated bond will get their share of company assets before both preferred and common stockholders. The reason is simple; during the bankruptcy distribution of corporate assets, holders of  “secured debt” and “unsecured senior debt” will have the highest claim on a corporate assets left over.

Diversification is one of the major tenets of investing and, with high-yield bonds, investors get what’s considered a separate asset class, one that has different characteristics from other securities. Investing in high-yield bonds allows investors to spread their assets across many different segments of the financial market, which reduces their “risk concentration”,  i.e. the amount of risk they take by putting too much of their money into one asset class in their portfolio.

Lastly, high-yield bonds usually have a very attractive “total return performance”, meaning they pay better dividends. This is especially true when the economy is booming and interest rates are either standing level or in decline. Total return performance includes any price changes that occur as well as the income an investor makes from reinvested interest.

As you can see, the benefits that investing in bonds gives an investor are various and, in most cases, potent. If you have any questions or need any advice about investing in bonds, or about personal finance in general, please let us know by leaving a comment or dropping us an email.

Ways you can Save Money in College

Just as every other college is different, every student is different. The only common experience for most students is the constant shortage of finances during their college years. Care packages from home are less frequent and it seems like every other time you confirm your account the balance gets smaller at a very high rate. To avoid insufficient money to spend when in college, you should learn how to budget and save the little you have to stay away from hefty debts.

Finances become an issue, especially if you do not have any experience in budgeting and saving. Keep in mind that money does not grow on trees and things do not get any cheaper therefore manage your cash well. Below we will look at some ways on how to save money in college:

Learn to Save Everyday and Remain Cool

Life on campus comes with many temptations for the naive student. You can blow through your spending without even realizing how fast it is going on a number of ways. Nevertheless, there are many ways to save your money while in the campus without denying yourself the adventures and fun moments that college has to offer.

Food Expenses

Meals are a big offender because they can put a huge dent on your funds in college. Certainly, you will have to eat, but if you cultivate a little discipline on your food budget, then you can save large sums of money. In this case, consider the following tips which will help you manage your food expenses when in college.

  1. Come up with a weekly food budget that you will stick to the whole week.
  2. Take college meals if you have paid for them instead of purchasing more food.
  3. Completely cut off unnecessary restaurant spending habits. This can seriously compromise your food budget.
  4. Avoid taking alcoholic drinks in bars and restaurants. The cost of night outs will strain you financially and this will cause serious implications on your overall budget. Otherwise, make sure you allot a sufficient amount of funds for this category in your weekly food budget.
  5. Eliminate daily smoothies, coffee drinks, and other treats. These treats are costly and a regular habit could add up quite fast therefore taking a very large chunk of your funds. Alternatively, you can buy a cheap blender or coffee maker and make your own drinks since it is a cheaper option.

Food is an essential requirement, but with some little budgeting and planning, it is possible for you to save a lot of money. As you are strict with your studies, be as strict with your food spending and you will avoid writing home for emergency funds.

Smart Saves on College Expenses

Necessities take up quite a large fraction of your fund. Tuition, fees, books, furniture, clothing, lab fees add up fast, thus leaving you with a small amount of cash to spend on entertainment and food. While these costs cannot be avoided, we have better ways to manage them and eventually save some money. The following tips will be of help:

  1. Buy used textbooks when possible. The cost of textbooks can be despicable, but used books can even cost half the prices of new ones. By so doing, you could stretch your funds a little more.
  2. Set up a college savings plan and make the most out of the funds you save.
  3. Pursue scholarships if possible, even beyond your first college year. Grants and scholarships help a great deal in reducing the overall cost of your college education. Also, in addition to applying for traditional scholarships, checking out weird scholarships might offer easier wins as the competition is generally lower for many. Remember that most of the scholarships are renewable.
  4. Once you are done with your textbooks, sell them to the campus bookstore or try selling them online. Either way you will recoup some money by passing your used textbooks on.
  5. Get a part time job where you can work on your leisure time.

In conclusion, it is possible to save money in college so long as you know how to plan your funds. Always analyze your monthly expenses and plan on how to cut back. Maintaining a budget is not as straight forward as you think and it calls for a lot of discipline to do so. On the other hand, reduce all unnecessary expenses and by so doing you will realize your funds stretching further than you may think.

Bond Basics: How Bonds Work

Whenever you drive down one of America’s highways, or see a factory expanding in the city where you live, you’re seeing bonds in action. The fact is, bonds are used by both the federal government as well as local and state governments, and private enterprise, to generate the funds they need for expansion, development and long-term infrastructure projects.

What most people don’t realize is that the bond market in the United States is even bigger than the stock market, and that it plays a huge role in the global economy as well as in the lives of practically every American. For example, while the NYSE, NASDAQ and AMEX stock markets have an average trading volume of around $110 billion, the US Bond Market has average trading volume of almost $850 billion.

When you see a bridge being built, you can bet that bonds are what paid for it. New transportation systems that move us around, power plants that give us electricity and sewer systems that bring water to our homes and take waste away are all financed with bonds. In fact, if it wasn’t for bonds, many of the systems and infrastructure that we all take for granted would eventually break down and fall into disrepair.

So, how do Bonds work, exactly?

Bonds start when a government entity or private enterprise issues a bond in order to raise money. They are the borrower and make a legally bound promise to repay the amount of money that they borrow back to the bondholders at a specific time in the future. The amount borrowed is known as the principal or face value of the bond and the payoff date is known as the redemption or maturity date.

The best part however is that the bondholder doesn’t just get their money back, they also get interest, which is known as the coupon rate or coupon, twice a year (in most cases).  In effect, the interest that is paid to the bondholder is the compensation that the government entity or private enterprise is paying in order to borrow the money they paid for their bonds.

Bonds that are issued by the United States government are usually bought directly by the investor but almost all others are purchased indirectly through broker – dealers at either banks or brokerage houses. These are known as the “underwriter” and they act as the intermediary between the issuer of the bond and the buyer/investor.

New bonds are purchased on the primary market and, if someone purchases a bond but wants to sell it before its maturity date, they can sell it on the secondary market.

Over the last few years the pricing of bonds has become much more transparent due to better industry regulation, and investors can see real bond prices on websites like and others. If you have any questions about purchasing bonds, or selling bonds that you already own, please let us know and we’ll get back to you with info and advice ASAP.

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