U.S. Treasurys are the safest bonds of all because the interest and principal payments are guaranteed by the “full faith and credit” of the U.S. government. Interest is exempt from state and local taxes, but not from federal tax. Because of their almost total lack of default risk, Treasurys carry some of the lowest yields around.

Treasurys come in several flavors:

- Treasury bills, or “T-bills,” have the shortest maturities - 13 weeks, 26 weeks, and one year. You buy them at a discount to their $10,000 face value and receive the full $10,000 at maturity. The difference reflects the interest you earn.

- Treasury notes mature in two to 10 years. Interest is paid semiannually at a fixed rate. Minimum investment: $1,000 or $5,000, depending on maturity.

- Treasury bonds have the longest maturities at 10 years. As with Treasury notes, they pay interest semiannually, and are sold in denominations of $1,000. Continue reading this post…

Hi to all, we’ll continue today with our series on on bonds. Sorry for the brief break it was due to some unforeseen circumstances. I do hope you enjoy today’s lesson though brief it seems. Cheers!

Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects. When you buy a bond, you are loaning your money for a certain period of time to the issuer, be it General Electric or Uncle Sam.

In exchange, the borrower promises to pay you interest every year and to return your principal at “maturity,” when the loan comes due, or at “call” if the bond is of the type that can be called earlier than its maturity (more on this later). The length of time to maturity is called the “term.”

A bond’s face value, or price at issue, is known as its “par value.” Its interest payment is known as its “coupon.”

A $1,000 bond paying 7 percent a year has a $70 coupon (actually, the money would usually arrive in two $35 payments spaced six months apart). Expressed another way, its “coupon rate” is 7 percent. If you buy the bond for $1,000 and hold it to maturity, the “yield,” or actual earnings on your investment, is also 7 percent (coupon rate divided by price = yield).

The prices of bonds fluctuate throughout the trading day as, of course, do their yields. But the coupon payments stay the same.

Say you don’t buy the bond right at the offering, and instead buy from somebody else in the “secondary” market. If you buy the bond for $1,100 in the secondary market, though, the coupon will still be $70, but the yield is 6.4 percent because you paid a “premium” for the bond.

For a similar reason, if you buy it for $900, its yield will be 7.8 percent because you bought the bond at a “discount.” If its current price equals its face value, the bond is said to be selling at “par.”

The bottom line: There are many ways of expressing a bond’s return, but “total return” is the only one that really matters. This includes all the money you earn off the bond: the annual interest and the gain or loss in market value, if any.

If you sell that $1,000 bond with the $70 coupon for $1,050 after one year, your total return is $120, or 12 percent — $70 in interest and $50 in capital gains. (Prices are usually expressed based on a par value of 100, so when you sell that bond for $1,050 the price would be quoted as 105.)

Till next lesson, remain financially intelligent in a world saddled presently with great financial concern, cheers!

Think “bonds,” and you probably think “safe,” “reliable,” and . . . “boring.” But that is only half the story.

Bonds can provide a worry-free stream of income. But this class of securities, which crushed stocks during the three-year bear market of 2000 through 2002, also includes a wide array of instruments with varying degrees of risk and reward. Continue reading this post…

1. Bonds are fancy

Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects. When you buy a bond, you are loaning your money for a certain period of time to the issuer, be it General Electric or Uncle Sam. In return, bond holders get back the loan amount plus interest payments.

2. Stocks do not always outperform bonds.

It is only in the post-World War II era that stocks so widely outpaced bonds in the total-return derby. Stock and bond returns were about even from about 1870 to 1940. And, of course, bonds were well in front in 2000, 2001 and 2002 before stocks once again took charge in 2003 and 2004. Continue reading this post…

1) Your fund is a persistent loser

The mere fact that a fund has low returns or even losses isn’t a good reason to sell. If the overall market is down, or the specific sector your fund invests in is out of favor, you can’t expect your fund manager to be a miracle worker. But if you own a fund that trails similar funds for two years by a substantial margin - say, 2 percentage points or more - think about moving on. Continue reading this post…

One day a man was sitting in his office on the 19th floor of a building. A man came running into his office and shouted, “John, your daughter, Anna just died in an accident right opposite this building” The gentleman was in panic. Not knowing what to do, he jumped out through his office window. While coming down, when he was near the 14th floor he remembered he didn’t have a daughter named Anna. When he was near the 7th floor, he remembered he was not married yet. When he was about to hit the ground he remembered that his name was not even John .. PLS, TAKE IT EASY! LEARN TO MANAGE STRESS…..IT KILLS FASTER THAN POISON

With the best business schools in the country churning out a steady supply of expensively educated MBAs who go to work for fund companies, you’d think funds would have no trouble posting above-average returns.

After all, fund shareholders (that’s you) are paying fund managers big bucks to find the best stocks in the market.

The fact is, however, a majority of funds don’t beat the market in most years. That is, you’re better Continue reading this post…

1) Think low expenses

The single most important thing you can do to earn competitive returns in a bond fund is to opt for those with low expenses. As a general rule, bond index funds will have lower expense ratios than managed funds that invest in, say, munis and junk. With the latter, at least stick with below-average expenses.

2) Stick with short to intermediate maturities

Over the past 20 years or so, long-term bond funds have provided the highest returns, partly because interest rates have steadily declined over that period. That may not always be the case. Continue reading this post…

How often have you said, “I am going to do such and such”? and it never came to pass? Was it because of lack of resources? There are a number of reasons why a plan might not come to fruition. We all have made proclamations about what we were going to do ever since we were little. And most of what we said we were going to do someday never happened. There is one crucial step that we tend to miss when making plans. Continue reading this post…