Top Uses For Bonds
bonds are important part of the economy. they help governments and corporations fund expansion, research and development and other important projects. bonds are also useful to the investor ?. a bond's primary use is capital preservation. bonds offer investors steady income in the form of regular coupons. the interest from government and corporate bonds is higher than interest on savings accounts. so, investors purchase bonds as another way to hold and build wealth. bonds can also help fight inflation. many types of bonds are indexed to the rate of inflation, so that when inflation goes up, the coupon on the bond will increase accordingly. these inflation indexed bonds help investors preserve the real value of their portfolios during times of inflation. some investors particularly ? and pension fund managers turn to bonds for the safety of a low risk investment. for example, government issued fixed income securities are considered to be much safer than equities, because they are backed by the full faith in credit of the government. many investors use government and municipal bonds because of the tax advantages they offer. depending on a type of a bond, an investor can get an exemption from federal, state or local taxes. sometimes are ?. lastly, bonds offer portfolio diversification because the performance of fixed income securities and equities is usually inversely correlated. this means that when the stock market is strong, the bond market usually weakens as more people sell their bonds to buy stocks. when the stock market is weak, the bond market benefits as investors return to safer investments. bonds preserve capital, protect against inflation, control risk, reduce taxes, diversify a portfolio and much more. it is important to learn about the different types of bonds so that you can find the bond that matches your investment strategy.
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