2. Steady Income
Bonds can provide consistent income, a great benefit for retirees. Unless the borrower defaults, investors will be paid, typically twice a year. This is where it is important that you educate yourself first before investing. Investment grade munis “municipal bonds” have a low default risk. In 2013, your chances of investing in a reliable, secure municipal bond from an issuer that wouldn’t default were roughly 99.9 percent. That’s according to the number of bond issues in the S&P Municipal Bond Index that defaulted last year. Out of more than 21,000 bonds in the index, only 23 failed to meet their payment obligations. On the other hand, companies are under no obligation to pay stock owners a dividend (it is equally important to pick your stocks carefully, see this article about stocks).
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