Bond Funds
Bond Funds, like Stock Funds offer professional selection and management of a portfolio of Bonds for a fee. Through a Bond Fund you can diversify the risks across a range of bonds pre-chosen by the manager. Some funds are designed to follow a market, often called an Index Fund. Other Funds are actively managed according […]
How much is a bond worth?
Most Bonds have a face or par value, which is what the bond will pay back at the end of the term (maturity date). The face value can be different for different Bonds, anywhere from $1 to $1,000,000, traditionally however, they are quoted as if the Bond is worth $100, even if the single bond […]
Secured Bonds versus Unsecured Bonds
We continue our beginners series discussing the different types of bonds available. Bonds can be split into two main categories, Secured and Unsecured Bonds, each with different risk factors. With a Secured Bond, the company issuing the bond is willing or forced by the lender to offer something with a market value as collateral making […]
Bond Credit Rating
To ascertain a particular risk profile of a bond it can be marked with a credit rating from various credit rating agencies. There is a range of credit ratings available for bonds and credit agencies like Standard and Poor’s and Moody’s score a bond from AAA (the best quality) through to D. This is an […]
Bonds can be safer than shares
First and foremost, bonds are much safer and secure than shares and bond prices are much more stable and boring. One of the main reason for this is that share prices move much more on speculation and market hype which is further increased by algorithm and computer trading. Bond are boring and boring is good. […]
Global Financial Crisis
One of the main reasons for the Global Financial Crisis (GFC) 10 years ago was a big credit crunch due to easy money which led to a very overvalued housing market. Like with every other bubble before it had to burst, which resulted in a loss of confidence by US investors in the value of […]
Derivatives
A Derivative is a contract between two parties that is derived from some underlying asset or security. Insurance is a kind of Derivative. You pay an insurance company an amount to insure your property, they agree to pay you another amount in case an event happens, for example your property is stolen. In finance, a […]
Automated trading and High Frequency Trading
Automated trading and High Frequency Traders (Algorithmic Trading) have emerged over the past decade as financial market have become more and more automated. These computers programmes have completely replaced the human specialists, or designated market makers as they were referred to. Automated trading has taken over the market. It’s rare now to have a human […]
How trading stocks works
Following on from the previous post, the general process of trading stocks on an exchange is that an order comes through a broker or online platform. That broker then posts to the exchange at what price he wants to buy (bid) or sell (ask) the stock. If another market participant is willing to accept the […]
How are stocks traded?
Most stocks are traded on one or more exchanges. A place where buyers and sellers can meet and decide on a price. Originally this was the place where buyers and sellers were meeting in person, but now most exchanges are automated in rooms full of computer servers. The purpose of an exchange is to facilitate […]