Did you know that Warren Buffet dictates a 90/10 asset allocation strategy where you would put 90% of your assets into an index fund (stocks) and 10% into government bonds? How does this compare to the way you’ve been investing till now?
If you are concerned that you haven’t put enough of your money into a safer investment like bonds yet and want to know about the different types of bonds available, then keep reading to get tips on how to invest in bonds.
1. US Savings Bonds
Investing in bonds is easy when you take advantage of the savings bonds offered by the US government. They are a safe bet, even though they have low returns because they are backed by the government. Make sure not to put too much of your investment into these unless you’re close to retirement age.
2. Foreign Bonds
If you wish to get into the international market safely, then consider adding some foreign bonds into your portfolio. Pick a country that you would like to invest in and find a bond from that market. For example, thejerusalemportfolio.com is a great way to get into the Israeli bonds market.
3. Corporate Bonds
Of course, you can also invest your money into corporate bonds in which you are essentially lending money to corporations. These have higher yields than most other bonds. Remember to buy bonds in tax-sheltered accounts as much as possible to protect your yields.
4. Bond ETFs and Funds
Nowadays, there are many bond ETFs and bond funds that you can invest in to take advantage of the bond market without directly buying the bonds. Each one of these ETFs and funds has a particular niche that they invest in, so do your due diligence and figure out what you would like your investments to go into.
5. Junk Bonds
With a name like junk bonds, you would think that most people would stay away from junk bonds. But it can be alluring to think of high, double-digit yields during ordinary interest rate environments. Make sure to do your research before dumping a bunch of money into junk bonds though, as they aren’t as safe a bet as US bonds would be.
Or stick to investment-grade bonds instead and save your money. Yes, a junk bond might hit big, but you could also end up losing all your money in it as well. Why take the chance when there are so many other easy ways to make money with bonds?
How To Invest in Bonds – A Brief Guide
With your knowledge of how to invest in bonds, you are all set to go. Remember to keep your allocation in bonds small, unless you are retired or close to it. Bonds don’t have as high a yield as stocks do, and that’s why it’s always a better idea to put most of your investments into stocks or index funds.
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