All About Bonds and Bond Mutual Funds: The Easy Way to Get Started

352 Pages·1999·1.26 MB·English

by  Esme Faerber

ALL ABOUT BONDS
AND BOND MUTUAL
FUNDS
O T H E R T I T L E S I N T H E
“A L L A B O U T. . .” F I N A N C E S E R I E S
All About Options, 2nd Edition
by Thomas McCafferty (0-07-045543-0)
All About Stocks, 2nd editon
by Esmé Faerber (0-07-134508-6)
All About Futures
by Thomas McCafferty and Russell Wasendorf (1-55738-296-4)
ALL ABOUT BONDS
AND BOND MUTUAL
FUNDS
The Easy Way to Get Started
ESMÉ FAERBER
Second Edition
McGraw-Hill
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DOI: 10.1036/0071367829
C O N T E N T S
Preface vii
Acknowledgments ix
Chapter 1
Why Invest in Bonds and Bond Mutual Funds? 1
Chapter 2
Evaluating Bond Characteristics 21
Chapter 3
How to Read the Financial Pages 47
Chapter 4
Short-Term Fixed-Income Securities 77
Chapter 5
Corporate Bonds and Corporate Bond Mutual Funds 107
Chapter 6
Treasury Securities and Treasury Security Mutual Funds 135
Chapter 7
Government Agency Bonds and Agency Mutual Funds 163
Chapter 8
Municipal Bonds and Municipal Bond Mutual Funds 187
Chapter 9
Convertible Bonds and Convertible Bond Mutual Funds 215
Chapter 10
Zero-Coupon Bonds and Zero-Coupon Mutual Funds 239
Chapter 11
Fixed-Income Mutual Funds 259
v
Copyright 2000 Esmé Faerber. Click here for Terms of Use.
vi Contents
Chapter 12
Closed-End Funds 293
Chapter 13
Managing Your Portfolio 307
GLOSSARY 325
INDEX 333
P R E FA C E
T
his new edition of All About Bonds and Bond Mutual Fundsis, of
course, updated, and it introduces many changes and improve-
ments over the first edition. Most individuals investing in the dif-
ferent types of bonds use mutual funds over individual bonds.
This practical guide is designed not only for practicing investors
with some experience in mutual funds or the individual types of
bonds but also for potential bond investors who have yet to get
their feet wet. By understanding the underlying bond invest-
ments held by mutual funds, investors are able to better evaluate
their choices of bond mutual funds. The purpose of this book is to
introduce and explain as lucidly and simply as possible the infor-
mation needed to purchase individual bonds and bond mutual
funds. While the book covers the basics of investing in the differ-
ent types of bonds, many sophisticated concepts also are includ-
ed. These concepts may be difficult for beginning investors, but
then the nature of determining the choices of different invest-
ments is not an easy matter.
The first chapter explains what bonds and bond mutual
funds are, their characteristics, the terminology of bonds, the
advantages of investing in bonds, how to buy and sell bonds, and
how the bond markets function. Adiscussion of the differences of
the investment classes of assets, such as stocks, bonds, and money
market securities, has been added. How these would be included
to achieve the investor’s objectives as set out by an investment
plan is also covered.
The second chapter evaluates the characteristics of bonds,
their risks, rates of return, yield, liquidity, duration, and valuation.
The third chapter includes an overview of the economic influ-
ences which have a bearing on the valuation of bonds. Under-
standing the relationships between the economy and the bond
markets is of great significance for bond investors. The second
part of the chapter includes tables on how to read the different
bond quotations listed in the newspapers. Beginning investors
should read these first three chapters in their entirety.
Copyright 2000 Esmé Faerber. Click here for Terms of Use.
viii Preface
Chapters four through ten discuss the different bond securi-
ties individually, namely, short-term instruments (money market
mutual funds, Treasury bills, commercial paper, bankers’ accep-
tances); corporate bonds and corporate bond mutual funds;
Treasury securities, including the new Treasury inflation-indexed
securities and inflation-indexed savings bonds, and Treasury
mutual funds; government agency bonds and agency mutual
funds; municipal bonds and municipal bond mutual funds; con-
vertible bonds and convertible bond mutual funds; and zero-
coupon bonds and zero-coupon mutual funds. These may be read
in any order.
Chapters eleven and twelve include the general information
on fixed-income mutual funds and closed-end funds. Each type
of fund is analyzed as to how it works, the risks, how to buy and
sell funds, the advantages, disadvantages, caveats, and whether
this type of investment is suitable for you.
Chapter thirteen discusses the management of a bond portfolio.
Investing money is not easy, and the aim of this book is to
make the task a little less difficult. Investors should invest in only
those investments that they understand and feel comfortable with.
Esmé Faerber
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