Bonds provide a stable investment, with slow growth, for investors looking to balance their portfolio or minimise risk. But what are they really?
Investment bonds are a debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. They may be sold by the Federal government, states, cities, corporations, and many other types of institutions. A bond is generally a promise to repay the principal along with interest on a specified date (maturity).
The current tax system makes investment bonds a tax-effective way to generate long term returns. If you invest a lump sum or regular amount for ten years or more, provided certain conditions are met, your earnings will be tax paid after this period.