Chris Worby is a Trusted Regina based financial advisor and Wealth Management services provider. With over 20 years of experience, Worby Wealth Management has been committed to providing a high standard of financial service to individuals, families and business owners in Regina and area. Worby Wealth Management listens and provides a personalized financial plan. In their latest Worby Wealth Management Trusted Regina Financial Tip, they discuss bonds.
The Wealth Building Toolkit: Bonds
By Jeremiah Worby - March 2023
Bonds are a type of
investment that can be used for both short-term and long-term goals. They're
considered safer than stocks, but also have less potential for growth over
time. In this article, we'll explain what bonds are and how they work as part
of your investment portfolio.
What is a Bond?
OK, maybe not James Bond, but rather we’re going to talk about financial bonds.
Investopedia.com
defines a bond as a fixed-income instrument that represents a loan made by an
investor to a borrower (typically corporate or governmental).
Bonds tend to move
opposite from share prices, which means investors often turn to bonds when they
want to reduce their portfolio risk – unfortunately this wasn’t the case in
2022. Investing in bonds can be a good
thing for diversification as it offers an alternative investment class for
those who want a more conservative option in their portfolios.
If you’re looking for
a way to diversify your portfolio, bonds are an effective tool.
What is a Bond Yield?
The yield, also known
as the coupon rate, is the annual percentage of money provided to investors for
making the loan. In other words, it's
how much interest you'll get from your bond.
When a bond is originally purchased, there is an
interest rate on it - for our example, let's say 5%. But because bonds can be
bought and sold afterwards, sometimes the yield can vary because the price
varies. It is a bit like a rental property, if you purchased a house for
$300,000 and rent it for $15,000/yr, that's a 5% yield. But if the value of the
house goes up to $400,000 but you're still only getting a $15,000 rent, then
it's a 3.75% yield.
The yield on bonds is
generally in response to changes in the Bank of Canada’s target for the
overnight rate. The Bank of Canada has a
target for the overnight rate, which is the rate that banks charge each other
for overnight loans. This rate can be
increased or decreased by the bank and this change affects all other market
interest rates. When bond yields go up
and down, it usually means that interest rates are going up or down as well.
Conclusion
If you’re considering
buying bonds, you might want to look at what’s happening in the market before
making a purchase. This will allow you
time to do research and make a decision based on facts rather than emotions.
Remember that there is
no one right answer when it comes to investing so it’s important to do the
research and talk with experts before making any decision about what will work
best for you and your financial situation.
Questions regarding
bonds?
If you have
questions about bonds or other types of investments, then contact Worby Wealth Management to get your
questions answered and start investing today.
Some of the services that Worby Wealth Management can help you with:
TRUSTED REGINA FINANCIAL ADVISORs Chris & Jeremiah Worby from Worby Wealth Management help you live your dream!
The
comments contained herein are a general discussion of certain issues intended
as general information only and should not be relied upon as tax or legal
advice. Please obtain independent professional advice, in the context of your
particular circumstances. This Blog was
written, designed and produced by Jeremiah Worby and Chris Worby for the
benefit of Jeremiah Worby and Chris Worby who are Financial Advisors at Worby
Wealth Management, a registered trade name with Investia Financial Services
Inc., and does not necessarily reflect the opinion of Investia Financial
Services Inc. The information contained
in this article comes from sources we believe reliable, but we cannot guarantee
its accuracy or reliability. The
opinions expressed are based on an analysis and interpretation dating from the
date of publication and are subject to change without notice. Furthermore, they do not constitute an offer
or solicitation to buy or sell any securities.
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