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Buying a US bond is usually considered to be a safe bet because it comes with the added security of the government being behind it. The money that you spend purchasing several kinds of US bonds can actually be considered as a loan that you provide to the government of the United States of America. The government bonds were previously obtainable only on paper but are now available in both the formats, paper as well as electronic.
However, it is wise to calculate the actual value of the bonds by means of a United States Savings Bond Calculator in order to check out the value of your investment in the government. One pleasant fact about buying these bonds is that the tax that is accrued on them is not required to be reported to the Federal authorities periodically or after the end of each year. It is mandatory to pay the tax only when you decide to exchange the bonds in lieu of cash. There are quite a few exceptions as far as paying tax on the interest accrued is concerned. The predominant among them is the time when the bond is exchanged for the purpose of education either of the holder himself or that of his immediate family.
Although the US bonds are considered to be a form of safe investment, yet it comes with certain distinct disadvantages of its own. The investor is only eligible to redeem the bond not trade with it. It does not even pay dividends with the accrued interest being the only source of income from the bonds themselves. It also serves best as a form of long term investment with three months worth of interest amount being charged as penalty in case you decide to encash it before a lapse of five years.
Knowing what you are worth vis a vis the value of your US government bond is usually ordeal especially when you do it the manual way. You need to spend quite a substantial period of time on the calculations if you don't consider yourself to be a maths pro. The first step involves taking stock of the value depicted on the bonds per se. Noting down the rate of interest is also an essential part of the manual calculation of US bond value. The product of both the values while taking the possible time of encashment into consideration will give you the exact figure of the interest that will be accrued on your bonds. Simple addition of the interest calculated to the face value of the bonds will let you arrive at a specific amount. Just deduct the amount of penalty from the sum total and you have the actual value of the bonds that you have purchased.
|Ask you financial advisor to explain the types of corporate bonds. Retirees will need to earn the best money market returns possible.|