Investing in Bonds (bond, E-Trade, Scottrade, brokers)

[hartford_renter]

HI,

Just curious why dont more people invest in the bonds issued by companies, usually just the stock. Like for example GE. Also does anyone know how to find the ticker symbol for a bond?

[j_k_k]

Originally Posted by hartford_renter

HI,

Just curious why dont more people invest in the bonds issued by companies, usually just the stock. Like for example GE. Also does anyone know how to find the ticker symbol for a bond?

The answer to the former is contained in the latter. Except for exchange-traded bonds (a relatively little-known type of security), bonds don't have tickers and aren't traded around on public exchanges as are stocks, ETFs, PTPs and their kin. For the most part, bonds are sold from dealer inventories, primarily to institutional/corporate/government investors. The average joe can buy them through some brokers, but the ones I am experienced with do not necessarily make it easy or cheap (considering the returns one can anticipate).

The easiest way for the general public to be in fixed income (which is the general asset class bonds fit into) is by buying preferred stocks, which behave somewhat like a bond. Other options are closed-end fixed income mutual funds (that's what I mainly buy for the purpose) and exchange-traded bonds (often high yield and that usually means high risk).

[jhtrico1850]

http://www.city-data.com/forum/inves...all-least.html

Check my thread for a great mutual fund that has the reliability and performance of bonds, but leaves the picking to a bond genius.

With that said, I bought PTTDX on Scottrade, and they have all kinds of bonds available to trade, municipal, Treasuries, CDs, corporate bonds.

Here are some examples.

185
Baa3/BB+ TEXTRON FINL CORP
Non Callable, Make Whole Calls, Spec Redemp, NYBE, TXT 6.000
11-20-2009 101.211 2.619 Mat


Aa2/AA+
Financial
GENERAL ELEC CAP CORP MTN BE
Non Callable, NYBE, GE 7.375
01-19-2010

103.875
0.032
Mat

[Timothylogan3]

Its all a question of return my mate. There are quite a few products within the fixed income investment section that offer better returns here. The guys have mentioned a few above here. But one that I can think of in the past, from an institutional investment angle, were cdo's. Now those draw and attracted alot of investors as they offered at times as high as 4% above corp bonds in returns. Your cdo and synthetic cdo were a big hit in the past.

[jhtrico1850]

Yeah, didn't the implosion of CDOs cause the credit crisis?

They don't seem too reliable to me. You risk a much higher chance of default for 10% vs 6%...?

[Texas User]

Originally Posted by hartford_renter

HI,

Just curious why dont more people invest in the bonds issued by companies, usually just the stock. Like for example GE. Also does anyone know how to find the ticker symbol for a bond?

As part of the Mutual funds but I no more 10%. If your are fairly young, no reason to invest heavily in Bonds.

[jhtrico1850]

What if you have no hopes for our economy? It took a global war of epic proportions to propel us out of bread lines. It took an Internet bubble for us to reelect an adulterer. And it took a housing bubble to keep the charade up.

What's next? They're going to try and tax oil, gas, and coal, because of the evils of "carbon" but they can only prop up that charade for so long before China eats up the capital flight.

I've been a bond bull before, but this article in Barron's only reinforces that view more.
Bonds vs. Stocks - Barrons.com



Again, look at this chart. 1803-1871, bonds were king. 1929-1949, bonds were king. 1968-2009, bonds were king.

If you bought bonds at the beginning of the decade, you'd nearly double your money. If you bought in the DJIA, you'd be down 20%. If you bought at 14,000, you're down nearly half. If you bought PTTDX at DOW 14,000, you'd still be over 5% up. If you bought DOW earlier this year, you're still down.

When you buy a stock, you are betting that its value will increase or that its dividend stays consistent. There is no guarantee about competitive breakthroughs or whatever. And if the company gets wiped out, bondholders get paid 1st.

When you buy a bond, all you have to worry about is that the company won't go bankrupt. If you're one of the few pitiful that bought GM bonds, too bad. Otherwise, again, PTTDX lost less than 1% in 1999 and has been up ever since.

[hartford_renter]

Thats too bad bonds arent more easy to buy. Now I know why bond traders make so much money. Hopefully there will be more options in the future.

[jhtrico1850]

?
I haven't bond an individual bond yet on Scottrade but they have a ton listed from all kinds of companies.

I am betting that America will stay solvent if it's the last thing they do. If not, I'm ****ed, goldbugs win. Hopefully though, people will see these times aren't as bad as the Depression and I'll beat stockholders as bondholders have in the past

A caveat, I do see oil heading $100. I feel boneheaded for not buying an ETF at $30. We will have a few years of weakness in the economy and oil is slipping recently still. It would be a steal at $45?

[j_k_k]

The important thing to remember about fixed income mutual funds is that they are not bonds. They are pooled investments that buy and sell bonds, which is not the same thing at all. I think a lot of new investors buy them, thinking they are buying bonds 'because you always get your money back', and then find out that their shares dropped in value, and if they sold them now they would not in fact get all their money back. After issue, you see, bonds trade at a discount or premium to their original par (typically $1000 for corporate bonds). Where they trade is a function of many things, especially the current interest rate climate. Bonds don't have to default for the fund to decline in value; the bonds the fund holds simply have to decline in value. And since bond funds buy and sell bonds, in the belief that their savvy will bring better returns, they can lose money simply because the manager made decisions that didn't work out so well.

Some pretty sophisticated people decide on the coupon rate for a bond offering, and they offer as little as they can manage while still believing they'll actually be able to sell the bonds. If the market perceives the issuer as risky--whether the risk is merely missing payments, or even potential loss of part or all of principal--it will take a higher rate to interest investors. A lot of developing nations (and some that aren't really developing much) issue bonds, and have to pay high interest rates if they want anyone to buy them.

One reason Treasuries can get away with fairly low coupon rates, then, should be fairly clear: the world perceives that default by the US government on its bonds is simply not going to happen. So far they have been right. Should the day ever come when markets begin to doubt this certitude, we'll have to raise the rates. Should we actually ever default on Treasuries, the proverbial waste will hit the fan big time.