No matter how you dice it, investing in stocks can be risky business. With the economy tanking, currencies losing value around the world and stories of people losing it all flooding the Internet, it’s understandable that some people are more keen on finding safer places for their money than they are in investing it in the markets.

But if you don’t want to invest in volatile stocks and you’re frustrated with the horrendously low interest rates offered via online bank accounts, what additional options do you have other than property or business investments? If you’re willing to let your money sit for a while, fixed rate bonds can be a great choice.

What is a Fixed-Rate Bond?

A fixed-rate bond is a type of investment in which you invest your money for a longer period of time, usually between one and five years. During the predetermined time period, you agree not to touch the money for the term of the note in exchange for a higher rate of interest.

Whereas an online savings account might pay an abysmal interest rate of 1% (most pay much less), fixed rate bonds pay upwards of 6-7%.

Why Invest in Fixed-Rate Bonds?

Bond investments help to diversify your portfolio and provide dependable payments from interest. A great option to add to your investment mix, bonds are predictable, which gives a lot of investors a certain level of peace of mind.

How to Choose a Fixed-Rate Bond

If you’ve decided to invest in bonds, before you make your final purchase, consider the following factors:

• Reputable Source. Bonds might be viewed as a safer investment option, but you still should do your homework about which companies and institutions you buy them from. Before you sign on the dotted line, ensure you’re making your investment with a reputable source that has industry experience, trained professionals as staff members and a consistent approach to handling your money well.
• Interest. You absolutely must understand the interest terms of your bond before you purchase it. You should now the interest rate for when you make the initial investment in addition to the interest rate when the bond matures. You also need to how and when the interest from your bond will be paid to you. If you’re not comfortable with the terms of a bond from one company, move on—there are enough options out there that you can certainly find something that will work for your preferences.
• Penalties. In addition to knowing the interest terms, pay careful attention to any penalties that might be imposed. Common penalties for bonds include taking your money out before the investment reaches its maturity date.

 

Have you invested in fixed-rate bonds?