Bond Investing Versus Investing in the Stock Market
An investor in stocks, or equities, becomes an owner in the business that issued the stock. As an owner, the stock investor profits when the business prospers and suffers when the business is going through tough times. Tough times may be caused by factors over which the business has no control.
By investing in bonds, an individual is lending funds to an entity, whether it is a business, or a city/state/political subdivision that would issue municipal bonds. The borrower promises to repay the individual. Bond investing requires that before you buy bonds, an investor must understand the ability of the borrower to repay the loan. The ability to repay constitutes the risk associated with bonds.
In summary, a stock investor is dependent on a business’s ability to prosper, while the investor who buys bonds in the fixed-income market is dependent on the issuer’s measurable ability to repay in full when the investment matures. Individuals engaged in bond investing or stock investing are assuming risk; including loss of principal and the fluctuation of value over time.
The GMS Group specializes in Municipal Bonds. We’ll help you to add Municipal Bonds or Municipal Bond Funds to your portfolio
The security of bond investing is based upon the assurance that principal will be returned to the investor when the bond matures. Advisors at the GMS Group specialize in assisting investors investing in bonds (and municipal bond funds) that have the safety that is consistent with an individual investor’s needs. Making a bond investment with the assistance of an expert will assure the individual investing in municipal bonds that they are the right investment for you.
Benefits of a Municipal Bond Investment
While all bonds are promises to pay, a municipal bond has additional distinct advantages. The interest earned from municipal bond investments is usually tax-free. Most municipal bonds are issued to be free from Federal Income Tax. Usually, they are also free from state income tax for investors residing within the state of issuance (Capital gains, if realized would however, be subject to tax). Another key advantage to a municipal bond investment is that the issuers have access to funds guaranteed by taxation or by specific public revenues with which to repay bond holders.