Introduction into the Corporate Bond World Part 1

This is a blog that is devoted to saving and investing in corporate bonds. Bond investing has been ignored in this country because brokers and bankers can’t make money in it unless you the investor invest millions at a time in this instrument. They only push bond investing when mutual funds are involved. If you ask your broker about investing in Corporate Bonds, they will confuse the issue and start talking about the favorite bond mutual fund of his firm. The reason?

With a mutual fund, the broker makes a monthly commission. If it is a front end load fund, they make money up front. If it is a back end load fund, they make money when you sell. Sometimes, they make money all three ways. They make money if the fund goes up. They make money if the fund goes down.

But if you buy the corporate bond directly from the broker, they make very little money. As a matter of fact, with some firms, you can buy a $1,000 bond, paying a commission of $10.95. If you wait until maturity, you never have to pay a broker again. If you decide to sell your investment before maturity, you will have to pay another $10.95. One such firm that charges as little as $10.95 per transaction is Zions Direct.

https://www.zionsbank.com/zd_index.jsp

Zions Direct has a 24,000 bond inventory of quality and junk bonds to choose from. The Corporate bond market is not like the stock market. That is, most stocks traded are on exchanges or an organized "Over the Counter" Market. Most Corporate Bonds are bought and sold on the Bond Market or a Bond "Over the Counter" Market. The volume traded is a lot lower or trading is a lot thinner than the trading in the stock market.

As I explained in my book, "Building Wealth With Corporate Bonds," in this market, investors can make more money than in the stock market at lower risk. In the book written in 2003, When I published the book, the actual point in that Dow Jones industrial Average stood at 9,523.27 on Sept. 02, 2003. On Sept. 11, 2008 the Dow stood at 10,917.51. If you could have invested in the Dow at that time, you would have made 1,394.24 or 14.6% over 5 years. But if you would have bought Great Atlantic & Pacific Tea Company 9.125% of 12/15/2011 bonds at the same time for $800, you would have gotten 11.41% per year, for five years. If you sold the bond on Sept. 11, 2008, you would have gotten $1,050, $250 per bond more than what you paid for it. But you would have had the option to keep the bonds until maturity getting $1,000 per bond on Dec. 15, 2011. That means you would get 11.41% per year for 8 years plus $200 more at maturity. All you have to fear is bankruptcy of the company. Even then, you are in a better position to get your money back then the stockholder.

My short term High Risk Bond Picks for future investing;

Hertz Corp 9% of 11/01/2009 Yield 11.364% Recent Price $980

Royal Caribbean Cruises 8% of 05/15/2010 Yield 12.885% Recent Price $890

Ahold Finance USA Inc 8.25% of 07/15/2010 Yield 8.24% Recent Price $1,000