Looking for somewhere to earn a fair yield on your money?
Most people only know of bonds (if they know anything about them at all) from investing in bond funds.
Bonds are a promise to pay back money under the specific terms of a contract and they’re used by governments and companies to borrow money at a defined interest rate. In today’s market, depending on risk, yields can be upwards of 10% (a recent issue from Carnival Cruise Lines for example).
The market for bonds is bigger than stocks and bonds are always safer than corresponding equity from the same issuer. Consider that in order for Carnival Cruise Lines (CCL) stock to be worth anything in the future, all of the CCL bondholders need to be paid in full.
Consider this example – People seem pretty confident about that TSLA stock, how would you feel lending your money to Tesla for 4.5% until 2025? (That’s $450 per year interest on $10,000 vs $10 per year in a savings account.) And while the Tesla bond has more risk, it sure pays better than a savings account, CD or Treasury, right?
The problem is that bonds trade in really big sizes (think $10,000 pieces and $3MM lots, and odd-lots pay huge spreads.) The big boy institutions don’t want to let the little guy (you) in…. they want you to pay them to run bond portfolios for you, but bond funds are very different than bonds. Bond funds are an investment scheme designed to earn a bond manager fees. By comparison, you buy a bond it pays you interest and at the end, when it matures, you get your money back.
Recognize, the opportunity to do this for individual investors doesn’t currently exist, but, would you be interested in learning about bonds and how they differ as investments versus stocks, if:
1. There was a way for you to access bond opportunities and enjoy similar liquidity as the stock market.
2. There were tools that allowed you to organize and manage your bonds in a logical way.
3. You could trade bonds in $ amounts that were reasonable, say $10, $100 or $1,000 lots.
An upvote would signal that this could be an interesting tool in your personal finance arsenal to help increase the amount of money you earn on your savings. A comment could help shape my thinking as I formulate how such a thing might actually work in practice.
[Would you like to learn how bonds are different?](https://preview.redd.it/ntaks0hiamy51.png?width=473&format=png&auto=webp&s=5406c8ef63da887dd239efec33e0df32d1409219)