MONEY OBEDIENCE

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A bond is basically an IOU issued by a company, a government, or another corporate entity. The investors buy these IOUs to be paid back at a certain date, and on that date (when the bond is said to have reached "maturity"), the investors will get their invested capital back plus interest. While the investors wait for the bond to mature, they normally receive some of that interest in regular intervals, such as quarterly or semi-annually, in the form of an interest check. For example, if you buy a 7-year bond and hold it for 7 years, as long as that issuer does not get into financial trouble, you will receive interest every year during the entire seven years. Then, at the end of 7 years, you will receive the money that you initially invested.

When you invest money in bonds or "the bond market", you have a number of options. You can purchase individual bonds or buy into a bond fund. It is beyond the scope of this system to discuss individual bonds. As an investor, you have to be very careful to take into consideration many variables in order to make well thought out buy and sell decisions.

Instead of individual bonds you may chose to invest your money in bond funds. Bond funds are pools of money from investors like you, which are invested by a professional fund manager on your behalf. These fund managers useyour money as well as co-investor's funds to buy bonds according to a certain policy spelled out in documents issued to you by the management company. The fund manager charges you a management fee for managing your money.