The most important things you need to know about bonds
The financial world we know, today is certainly a complex being. It operates and lives under ever-changing laws which sometimes seem like magic to the general public. Even though so much of our lives depends on the markets, brokers, and bonds – we rarely think about it, unless we have to. The world of bonds, investments, loans and banks is something regular people rarely delves in. But, if you wish to get started learning about it, this is the right place to do it.
What are bonds?
Bonds are pieces of paper. Only, this piece of paper can hold a very high value if you bring it to the bank. It’s not money by itself, and you can’t buy a dinner with it. But, you can hold it in the name of interest or receive money for it in a bank.
Are bonds stock?
Bonds also not the same as the stock. While stock also represents a theoretical value, they differ in nature. Owning stock makes you a shareholder and buying stock will tie you to a company or an entity bound by stock. Bonds, on the other hand, transfer no possession. Owning a bond doesn’t make you a part of the company or investor you bought it from.
Banks issue the bonds in most cases and title them to the investor or bearer. It holds the bond information written on it so bank clerks can check its value and legitimacy. Bonds are also not bound to the value of the company or the investor. You can cash them no matter what the status of the investor is. This differs significantly from the stock significantly.
Who uses it?
The primary source of bonds are countries, or more precisely, the governments of individual countries. Not every country in the world issues bonds and not all bonds are issued this way. Other entities that issue stock include large organizations like banks, namely the World Bank and ESM.
Bond buyer, on the other hand, can be virtually anyone. In most cases, bonds are purchased by the investors whose primary job is the bond trade. Also, other banks and funds buy bonds, for themselves and customers alike. You can also buy bonds, but we would recommend doing it through a broker. The world of bond trading is a highly sophisticated one.