First, you could purchase an individual bond, which provides you with predictable interest payments. When your bond matures, you’ll get your principal back, unless the issuer defaults, which is rare in “investment grade” bonds.
You could also buy a bond-based mutual fund, which typically holds several different types of bonds. A bond fund does not pay you a fixed rate of return. Instead you’ll receive dividends, which fluctuate based on underlying interest rates and capital appreciation.
Finally, you could choose a UIT, which contains a variety of bonds, but, unlike a bond fund, does not change its holdings. Individual bonds, bond funds and UITs all have something to offer, so give them some consideration.
Match Financial Goals With The Right Investments
Over the course of your life, you’ll almost certainly have many different financial goals. To help achieve them, you’ll need to use many different investments. How might you target specific investments for specific goals? Here are a few suggestions:
To save for a home, you might want to use certificates of deposit (CDs) or short-term, investment-grade bonds.
To enjoy a long and comfortable retirement, you’ll want to accumulate savings in tax-advantaged vehicles, such as a 401(k) and IRA.
To save for college for your kids, you may want to consider a Coverdell Education Savings Account or a Section 529 savings plan, both of which offer a variety of investment options and tax advantages. Contributions are tax-deductible in certain states for residents who participate in their own states’ 529 plans.
These investments aren’t the only ones available to you. But they help point out the importance of identifying your various goals and choosing the right investments to help meet them.
Contact Wendell at Edward Jones www.edwardjones.com.