Bonds Broken Down - Different Types Of Bonds

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

Savings bonds, corporate bonds, municipal bonds - the list of available bonds goes on and on. But what do they all mean? Let's first take a step back and determine what a bond, plain and simple, is. By definition, bonds are evidence of a debt where the issuer promises to pay the bondholder a specific amount of interest and to repay the principal at maturity. Typically issued in multiples of $1,000, they are issued by federal, state and local governments and are available in three basic types. Here is where we'll get more specific:

Treasury Bonds
Issued by the U.S Department of the Treasury through the Bureau of Public Debt, treasuries are known to be the highest-quality securities out there. Available in the form of treasury bills, treasury notes, treasury bonds and treasury inflation-protected securities, these are traded on the secondary market and are used to fund the Federal government's operations. In terms of advantages, one of the most notable benefits of this type of bond is that any interest is exempt from state and local taxes.

Municipal Bonds
Municipal bonds are those bonds that are issued by state and local governments. Being that they come from the state level, their purpose is to fund the building of public municipalities such as schools, highways and sewer systems. As far as taxes are concerned, these bonds are often exempt from federal income taxes and occasionally from state and local taxes depending on where you live and how your location correlates to where the bond was issued.

Corporate Bonds
Last but not least, corporate bonds are issued by companies to fund business expansions or capital investments. Since companies have a higher risk of defaulting as compared to governments, they innately come with a higher level of risk themselves. However, these types of bonds are often associated with having higher yields.

When it comes to investing and financial planning, we at American Investment Planners LLC can determine which type of bond is most appropriate for your financial situation to generate the best long term results. For more information about the variety of bonds and how you can use them to your advantage, visit our online research center or contact us at (516) 932-5130 to set up an appointment with one of our financial planning experts today!

Information courtesy of Emerald Connect.