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Savings Bonds [06/05/2006]

Savings Bonds

Kevin Stith

One of the safest modes of investing money in the market is savings bonds, as they are backed by the full faith and credit of a country's government.

One of the unique features of these bonds are that if an investor doesn't keep these for a month, he is still entitled to receive interest for the whole month; meanwhile, other bonds pay interest for the exact days that the investor keeps the bond with him. Another interesting fact about the savings bonds is that an investor doesn't have to pay commissions or fees while redeeming the same. In case an investor redeems a bond before the time of maturity, the government might exact a penalty, which can result in forfeiting some interest.

Savings bonds are different from the other U.S. government bonds or any other bonds. They are not liquid investments, and the treasury of a country usually refers them as non-marketable securities. It also translates to the fact that there are no secondary markets for savings bonds. The bondholder cannot transfer or sell them to someone else at a market price, which is determined by demand and supply. The investor can, however, redeem the bonds in six months for a price mathematically determined by the terms set at the time of issuance.

As these savings bonds are not marketable, i.e., the prices of the bonds are affected by the upsurge or downturn in a sector, the investor does not make any capital gains. Thus, these bonds have no market risk and the investors just receive the interest on the capital invested by the end of the tenure.

A few things that one must remember while buying these bonds are that saving bonds sold on the Internet are not interest-bearing securities, since savings bonds are non-transferable. Moreover, buying bonds as a part of the chain letter or pyramid is also prohibited, and savings bonds cannot be posted as collateral while applying for a loan with any bank.

Although savings bonds help in tax investment, the rules set by a particular government should be strictly adhered to for gathering full benefits after the bonds mature.

Bonds provides detailed information on Bonds, Stock and Bonds, Savings Bonds, Bail Bonds and more. Bonds is affiliated with Commodity Brokers.

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