Posts Tagged ‘government bonds’

Investing jitters? Curb them with government bonds

Posted October 26, 2008 by Bernz

History reveals that in the last 80 years, the U.S. has experienced 13 recessions. But each time America has recovered with economic expansions. In California Gov. Arnold Schwarzenegger is using bonds to stimulate the economy. You could have the same affect in your own investment portfolio if your approach to investing includes low-risk government bonds.

But first a review of bonds. Basically a bond is a loan that you give to a company or in this case, the government to fund an expansion project. When you purchase a bond, the money used to buy it is called the principal. The people who borrow the money agree to pay you interest on your principal. The borrower (aka the bond issuer) also agrees to pay you the principal and the interest on a certain date. That date is called the maturity date.

Government bonds, also called treasury bonds are considered low-risk because they’re issued by the government—city, state, and federal. Financial backing by the government pretty much guarantees that it will not likely default on its promises. Bottom line: The U.S. government has a long and successful track record for being a safe investment.

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