Vanguard Bond Funds

There are various ways to invest your money available on the market, each with certain amounts of risks and promises of profit. Therefore, your decision should be made depending on the amount of capital you have at your disposal and the risks you are willing to take. Whilst the media seems to focus more on the stock and currency trading markets, the truth is that bonds are the first investment choice of the population. Purchasing bonds typically present lower investment risks and offer you greater flexibility. Moreover, statistics show that a bond fund seems to be a more viable alternative to purchasing single bonds, due to the diversity of the securities.

The basics of bonds
A bond is basically a written promise made by a corporation or a government agency to their investors that they will return the money they borrow on a designated date plus a monthly rate of interest through dividends. Based on the initial agreement, there are different maturity durations for each particular bond, meaning that the investment will be redeemable after that certain period. The profit a person can earn from the bonds investment is related to the contingency risk involved. For instance, if you choose to purchase safe investments, then you will earn quite a bit less interest than if you were to purchase bonds from a corporation or organization deemed as a liability. The highest quality bonds are rated AAA while the lowest quality bonds are rated D.

The risk diversity of the Vanguard bond funds
When you are purchasing bonds for a certain corporation, you stand to lose your entire investment if that company were to go bankrupt. Whilst it is true that certain companies and government agencies, such as the National Treasury, present very little risk, anything is possible in the chaotic shifting of the financial market nowadays. However, if you choose to invest in a bond fund such as Vanguard, for instance, your investment will be split and used to purchase several securities from different companies.

Therefore, you stand to lose very little if one of them should happen to default. Furthermore, a bond fund relies on the expertise of professional financial analysts when deciding what bonds would produce the highest profit. Additionally, the customer has the last word and can decide to sell certain securities from his bond package if he considers the speculations of the fund’s analysts incorrect.

Assessing the value and duration of the investment
Another great thing about the funds like Vanguard is that you are able to choose the most appropriate bonds package for your current capital and duration. There are several investment plans to choose from and you will benefit from the advice of the experts who will take into account all the factors involved in the decision process. However, you should offer your financial counselors all the necessary details in order to get full advantage of their expertise.

Reinvesting the interest in the Vanguard fund
Unlike single bonds, the Vanguard fund allows you to reinvest the monthly profit you make from your interest fees, thus maximize your maturity profit. Since the interest rate of the plan is usually paid off at the end of the month, you can make the most out of your money on the withdrawal date. On the other hand, with single bonds, you are not allowed to reinvest the fixed six months interest, thus you will be missing out on a part of the profit.

Indexed funds versus active management
The index managed funds use a time-determined pattern in order to assess the worth of the securities. Therefore, once you choose the indexed fund, you will spend less money on selling and buying bonds, thus the profits will not be diminished by transaction fees. However, an active management strategy is more risky but can prove to be more profitable in certain cases. Your fund manager will constantly seek exciting investment opportunities and sell the bonds that become unprofitable. Therefore, the profit of this method depends on the business intuition of the financial manager.

In retrospect
Vanguard bonds fund is a viable low-risk investment solution. With this bonds fund you have the possibility to benefit from the financial expertise of professional investors who actively seek new solutions to maximize your profit margin, whilst weeding out risky securities. Furthermore, the risk diversification provided by Vanguard ensures that you will not lose all your money when something does not go according to plan.

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