CD Bond, How They Differ

Just as you can take a certificate of deposit and turn it into an IRA you can also turn it into a bond. A CD bond is another type of investment that is a combination of a certificate of deposit and a bond. It carries a higher degree of risk than a regular CD. These types of bonds may be good for the person who is looking for a higher yield than what they would get with an ordinary CD but is not ready to dive into stock market trading just yet.[br]

Just as you can take a certificate of deposit and turn it into an IRA you can also turn it into a bond. A CD bond is another type of investment that is a combination of a certificate of deposit and a bond. It carries a higher degree of risk than a regular CD. These types of bonds may be good for the person who is looking for a higher yield than what they would get with an ordinary CD but is not ready to dive into stock market trading just yet.[br]

To start, you need to have a basic understanding of bonds. A bond is defined as an IOU that is issued by the government, a government agency or a corporation. It is issued to cover money that the bondholder has lent out. To use an example, if you buy stock in a company then you become part owner of the company. However if you hold bonds for the same company then you are a creditor.

A CD bond is not as exciting as stocks and the same can be said for regular bonds. However bonds play a significant role in how the economy works and they also matter a great deal in terms of having a portfolio that is as well-balanced as it should be.[br]

The returns you will get from a bond are not as great as what will come from a stock. However they are a much safer investment than stocks are. You risk much less which is what make bonds so attractive to some investors. It is the safety and stability inherent in bonds that helps to counter the tremendous amount of fluctuation that can occur when you invest in stocks.

As an investor it is advisable to have a CD bond or two, as well as other types of bonds and some stocks. Having a mix of all of these investments is an excellent way to round out your portfolio. This is a general rule of thumb for investing. The more risk you can handle and are willing to accept the higher percentage of stocks should you have in your investment portfolio. The opposite is the case if you are a conservative type of investor- you will want more bonds than stocks if you are concerned about risk. If you have less money to gamble with then gamble in a safer manner by choosing bonds. Or start with one CD bond. You can still have stocks but choose more bonds than stocks and your risk will be reduced.