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Bond Investing

08/06/2009

According to best-selling author and Redbook expert David Bach, bonds are currently an excellent venue for investing. Less risky than stocks (if a company goes bankrupt and you own a part of that company through stocks, bondholders typically get paid first and there may not be anything left for you), and receiving higher interest than a CD, bonds are a literal loan you give with a promise of payback + interest. Bach recommends purchasing government bonds directly from the U.S. Treasury, in particular I-bonds. You can purchase these bonds for $25-$5000. You have the ability to cash in after 12 months, but forfeit 3 months interest if you cash in before 5 years. If I make an initial investment of $1000 and add an additional $200 a year, in 29 years at 2% interest, that same $6,800 will be worth $8,768, or $9,534 if used for educational purposes (tax-free). Tiny Blavatar 02

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