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Fixed Income Securities BondsWhy bother with bonds? In addition to providing a stream of regular income where needed, bonds have an important role to play in effective portfolio diversification. The case is well made in a 2005 report from Fidelity. The most important bond market in the world is that for U.S. government bonds, and it all starts here at the Bureau of the Public Debt. The U.S. Department of the Treasury also offers TreasuryDirect, a means whereby individuals can buy Treasury Bills, Savings Bonds, Notes and Treasury Inflation Protected Securities (TIPS) directly from the Treasury itself. Don't overlook the Treasury's bible on savings bonds, The Savings Bonds Owner's Manual, the Savings Bond Wizard that lets you manage your savings bonds and a calculator to value them. The pattern of yields over time for U.S. government securities, called the Treasury Yield Curve, sets the standard against which the yields of all other bonds, corporate and municipal, are judged. StockCharts offers a particularly interesting look at the yield curve over time compared with the S&P 500 Index. Smart Money's Living Yield Curve also offers a dynamic look at the curve. Bloomberg plots the yield curve graph for you. There is no better, albeit very detailed, description of an important class of bonds called Treasury Inflation Protected Securities (TIPS) than that provided by the Treasury and updated periodically. Another site, offered by an economics professor at Ohio State, has some interesting commentary on TIPS and other inflation indexed investments, not likely to be found elsewhere. The Bond Market Association's site, InvestinginBonds.com, provides extensive pricing and educational information on bond investing from a reliable source. Two good sources of basic bond statistics are Bond Center from Yahoo! Finance and Market Data: Rates & Bonds from Bloomberg.com. Another interesting site with news, yield curves, data and commentary is Bond Strategist. There is no area of investing for individuals that has been impacted more by the Internet than the bond market. Previously, the private preserve of large institutions, corporate and municipal bonds are being made increasingly available in appropriate size for individual investors. Pricing, however, continues to be a problem. With bonds, prices are not set in transparent, continuous auction markets but instead are mainly determined by bond dealers pricing their own inventories. Much is being done to improve the efficiency of the U.S. non-government bond market, but extreme caution must still be practiced by the individual bond investor. You will be in there with the wolves! At least two reputable sites offer help, however. Both MunicipalBonds.com and NASD BondInfo are trying to provide greater transparency for the municipal and corporate bond markets respectively. A commercial site is FMSbonds.com. Among the many Web sites offering bonds and related market information are: Fidelity, Bonds For Less, BondsOnline, BondPage,TradeBonds, InterNotes, and LaSalle/ABN AMRO. Although provided by a bond broker and aimed primarily at financial advisors, BondSchool.com can be a useful source of information. Bond mathematics can be a bit tricky. FICALC is the best free fixed income calculator we've seen. Certificates of Deposit (CDs) For many people, a bank deposit insured by the Federal Deposit Insurance Corp. (FDIC) provides a degree of comfort sufficient to offset the generally modest returns available as well as the possibility of early surrender charges. Preferred Stocks Long favored by yield seeking institutional investors because of their favorable tax treatment, preferred stocks have caught the attention of individual investors during a time of low bond interest rates and stock dividend payments. Among sites providing information are Preferred Stock Guide, PreferredsOnline and QuantumOnline. |
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