Explaining the five S’s | Bakingbusiness.com | February 24, 2012 10:13 (2024)

FAQs

When you buy municipal bonds, you are lending money to the government. A true b false? ›

By purchasing municipal bonds, you are in effect lending money to the bond issuer in exchange for a promise of regular interest payments, usually semi-annually, and the return of the original investment, or “principal.” A municipal bond's maturity date (the date when the issuer of the bond repays the principal) may be ...

Timing the market is a strategy that involves buying and selling stocks based on expected price changes. Prevailing wisdom says that timing the market doesn't work; most of the time, it is very challenging for investors to earn big profits by correctly timing buy and sell orders just before prices go up and down.

They may have altruistic goals, like Warren Buffett and others who have pledged to give the bulk of their wealth to charity. They also believe their trading helps markets become more efficient, bringing the market price closer to the true intrinsic value. So, each group has their reasons for investing in bad companies.

The biggest difference between stocks and bonds is that with stocks, you own a small portion of a company, whereas with bonds, you loan a company or government money. Another difference is how they make money: stocks must grow in resale value, while bonds pay fixed interest over time.

Municipal bonds can be a tax haven, often generating higher returns than Treasuries. They can still lose to inflation and tie up large sums of money for much longer than a recession typically lasts.

Based on the stock market's historic performance, there's never necessarily a bad time to buy -- as long as you keep a long-term outlook. The market can be volatile in the short term (even in strong economic times), but it has a perfect track record of seeing positive returns over many years.

So, if you had invested in Netflix ten years ago, you're likely feeling pretty good about your investment today. A $1000 investment made in March 2014 would be worth $9,728.72, or a gain of 872.87%, as of March 4, 2024, according to our calculations. This return excludes dividends but includes price appreciation.

With the right strategy, there's never necessarily a bad time to invest in the stock market. Regardless of whether prices surge or dip in the coming months, by investing in quality stocks and staying in the market for the long haul, you can maximize your earnings while minimizing risk.

Key Takeaways

If a company declares Chapter 11 bankruptcy, it is asking for a chance to reorganize and recover. If the company survives, your shares may, too, or the company may cancel existing shares, making yours worthless. If the company declares Chapter 7, the company is dead, and so are your shares.

What is a bad company to invest in? ›

When a company can no longer operate profitably, it may be forced to declare bankruptcy. At this point, the company is essentially worthless until it decides to restructure or fold altogether. Companies in this precarious situation have two choices: Chapter 11 bankruptcy, also known as a reorganization.

Should I only buy bonds when interest rates are high? There are advantages to purchasing bonds after interest rates have risen. Along with generating a larger income stream, such bonds may be subject to less interest rate risk, as there may be a reduced chance of rates moving significantly higher from current levels.

Holding bonds vs. trading bonds

If you're holding the bond to maturity, the fluctuations won't matter—your interest payments and face value won't change.

Stocks work like this: Companies sell shares in their business, also known as stocks, to investors. Investors buy that stock, which in turn provides the companies money for expanding their business through creating new products, hiring more employees or other business initiatives.

Municipal bonds are a type of debt obligation issued by local, county and state governments. Also called munis, municipal bonds are a way for investors to earn some interest in exchange for loaning money to pay for things like constructing roads, bridges, schools and hospitals.

Municipal bonds (or “munis” for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems.

A bond is a fixed-income instrument and investment product where individuals lend money to a government or company at a certain interest rate for an amount of time. The entity repays individuals with interest in addition to the original face value of the bond.

When you buy a U.S. savings bond, you lend money to the U.S. government. In turn, the government agrees to pay that much money back later - plus additional money (interest).