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Green Stocks |
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Rule #1 - Do not lose money! Rule #2 - Never forget rule number 1! ( by: Warren Buffet )For comments or questions please email: : admin@equityresearch.com |
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Bonds and Interest RatesThere is an inverse relationship between bonds and interest rates. That means that if interest rates rise, then the value of a bond will fall. Conversely, if the interest rates decline, the value of a bond will increase.You need to think of a bond as a long term investment. If a bond is to be held for five years at six percent interest and the interest rate is increased by 3% then the bond has lost attractiveness and will go down in value. The reason is that as interest rates rise, the existing bond is less attractive. What if interest rates go above the bond rate. In that case, nobody will want to buy the bond at a lower rate. The lower demand makes the value of the bond worth less. Bonds and interest rates also work the opposite way. If you have a high interest bond and interest rates fall, then you will really want to hang onto the bond. Demand for the bond will go up because the rate of return is a lot better than other interest rates. The increased demand makes the bond worth more. In the marketplace, long term bonds are constantly bought and sold. You don't have to hold them to maturity. With bonds, the market is very sensitive to interest rate changes and there is an inverse relation ship between bonds and interest rates. |
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