An investment in bonds, like any other investment, should be tailored to your overall investment goals, tolerance for risk, and other individual circumstances. By answering some fundamental questions and arming yourself with some basic investment perspectives, you will be better able to make decisions and work with investment representatives or advisers to find the appropriate mix of securities to achieve your investment objectives.

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Because bonds typically have a predictable stream of payments of interest and repayment of principal, many people invest in them to receive interest income or to preserve and to accumulate capital. If you are looking for current income, you will most likely be interested in bonds that pay an interest rate that stays fixed until maturity with interest that is paid semiannually. However, if you are saving for retirement or a child’s education or other capital accumulation goal, you may wish to consider investing in zero coupon bonds which do not have periodic interest payments. Instead, they are sold at a substantial discount from their face amount and the investor receives one payment--at maturity--that is equal to the purchase price (principal) plus the total interest earned, compounded semiannually at the original interest rate.

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There are several ways to invest in bonds. You can buy individual bonds, bond funds or unit investment trusts. Your choice will depend on the amount of money you have to invest in order to achieve diversification, the degree to which you want professional management of your portfolio and your willingness to pay for professional selection and portfolio management (bond funds). Generally, investing in individual bonds is best for preserving your capital assuming they closely match your other objectives (like maturity); while bond funds offer convenience and diversification even at minimum investment levels

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