“Bonds are the new stocks,” says James Sarni, managing principal at Payden & Rygel, a Los Angeles–based investment firm.
Corporate Bonds are a great opportunity to find higher yields than cash and CD's, without the risk and volatility of stocks. Unlike bond mutual funds, if you buy an individual bond and hold it to maturity, you will receive your full principal back. If you bought it at a discount, you can even make a profit on your initial investment. All along the way, you will get the income, called coupon payments (think interest) that typically are paid every six months. The main risk in buying bonds are default risk, meaning the company that issued the bonds go out of business. But this is a low risk when buying investment grade bonds, that is, bonds with credit ratings of BBB or higher. You want to buy solid companies, just like stocks, but don't be afraid to buy a bond with a rating of A or AA. You do need to bring a little more cash to the table when buying bonds too. Commissions are priced in to the price you pay for the bond, so the more bonds you can buy at one time, the better price you will get. For more on bonds and some specific bond ideas, read the article "Better Off in Corporate Bonds". So call your broker and set up an account, and you can be a Bond trader. It's a quite bit safer than a Day trader!