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Types of Bonds

Benefits of Investing in Corporate Bonds

Investors buy corporates for a variety of reasons:

Attractive yields. Corporates usually offer higher yields than comparable-maturity government bonds or CDs. This high-yield potential is, however, generally accompanied by higher risks.

Dependable income. People who want steady income from their investments, while preserving their principal, may include corporates in their portfolios.

Safety. Corporate bonds are evaluated and assigned a rating based on credit history and ability to repay obligations. The higher the rating, the safer the investment as measured by the likelihood of repayment of principal and interest. (See Understanding Credit Risk.)

Diversity. Corporate bonds provide an opportunity to choose from a variety of sectors, structures and credit-quality characteristics to meet your investment objectives.

Marketability. If you must sell a bond before maturity, in most instances you can do so easily and quickly because of the size and liquidity of the market. (See Marketability.)

 

All information and opinions contained in this publication were produced by the Securities Industry and Financial Markets Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, the Securities Industry and Financial Markets Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.