Kinds of Bonds
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How are Bonds Classified?
There are 3 kinds of government bonds, distinguished by their maturity lengths:
- Bills : less than 1 year
- Notes : 1 to 10 years
- Bonds : more than 10 years
What Other Types of Bonds are There?
There are three other kinds of bonds you should be aware of. These include:
- Municipal bonds
- Corporate bonds
- Zero coupon bonds
What are Municipal Bonds?
These are slightly riskier than government bonds. These are bonds from cities which are free from federal taxes. Some cities make their bonds tax free. This would make the bonds completely free of taxes. However, the yield is usually lower because of the tax savings.
What are Corporate Bonds?
These are even riskier than municipal bonds. They are issued by companies. Because of the risk involved, these bonds tend to have much higher yields. This makes these bonds a good investment for an individual looking for a fixed income. The yield will depend upon the credit quality of the corporation. There are a couple of variations on these types of bonds:
- Convertible bonds : Bonds which can be converted into stock
- Callable bonds : Allows company to redeem an issue prior to maturity
What are Zero Coupon Bonds?
These are discounted bonds issued below par value. This means that when it matures you will receive more than you paid for it.
Do I Need a Lawyer Experienced in Investments?
Consultation with an attorney for most investment decisions is probably unnecessary. However, if there is a dispute with your broker, such as when you lose a significant part of your investment based on the broker's bad advice, you should speak to a lawyer immediately. An experienced investments lawyer will help explain your rights as well as preserve any possible remedies you may have.
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Last Modified: 12-05-2012 04:46 PM PST
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