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If we introduced you to a steady, less risky investment with an interest rate that grows your money over time, you might think we’re talking about a savings account. But actually, we’re here today to dive into something with a lot of similarities: bonds.

Bonds are a fantastic strategy for just about anyone. Most are easy to get into, and depending on the type of bond you purchase, you can see some real, impactful returns that put your money to better use than a savings account.

Here’s what you can expect from bonds and how they can help you take a few steps closer to your long-term dreams and goals!

What is a Bond?

A bond is simply a debt security issued by a specific entity, like a government, municipality, or corporation. When you buy a bond, you're basically lending them some cash. In return, they pay you interest over time, and when the bond matures or is sold, they then return your initial investment.

Here’s a quick breakdown of the different types of bonds out there:

  • Worthy bonds: Worthy bonds let you invest right in your own backyard. We’re all about supporting the little guys on Main Street instead of the big shots on Wall Street, so we provide loans to residential real estate developments in your community with the bond sale proceeds.
  • Treasury bonds: These bonds loan money to the U.S. government. They typically have long maturity dates and pay a guaranteed interest amount.
  • Corporate bonds: These allow you to loan money to private or public corporations, often at higher interest rates, but they come with a greater risk than US government bonds and larger upfront investments.
  • Municipal bonds: Municipal bonds allow you to invest in government at a local level, either by state or even by county. They usually pay interest twice per year, but the interest rates tend to be lower.

5 Benefits of Investing in Bonds

We’ve touched on it a bit, but why choose bonds over (or in addition to) your savings account? Here are a few highlights to help you decide whether bonds are the right choice for your future.

1. Predictable Income Stream 

Bonds are generally considered very reliable investments. While your 401k might face some roller coaster ups and downs alongside the stock market, bonds are all about adding some extra oomph to your savings in a more predictable way. 

When you purchase a bond, you typically lock in an interest rate and a maturity date – which means you can calculate exactly how much your bond will be worth at the end. Some bonds (like Worthy bonds) let you sell whenever you wish if you’re really strapped for cash, but it’s nearly always best to keep the bond and the interest it earns so you can get the most impact from your investment. 

A bond’s steady income stream is part of why they’re especially popular during retirement. Of course, steady growth can benefit you at any stage of your life. Imagine what a 7.0% Fixed APY could do for your savings goals. That’s the rate we offer at Worthy!

2. Diversification

If you invest in stocks or have funds in an IRA or a 401k, your investments are at the whim of market fluctuations. Diversification helps protect you and your way of life even when the market is down.

The market will always have its ups and downs. Pulling money out of your IRA during a down market means the value in your account won’t go nearly as far as it could have (plus a penalty tax if you’re not 59 ½ years old). Instead, it’s generally best to leave that account alone until the market improves.

But what if you’re strapped for cash or plan to make a large purchase in a few years? Unlike Treasury bonds, Worthy Bonds aren’t subject to Wall Street volatility. If needed, you can sell some to cover an emergency or plan ahead by purchasing bonds for a specific goal – like the new car you want to purchase in three years.

If you invest all of your spare cash into the stock market, you might see greater returns than the predictable interest on bonds. However, you’ll also take on the risk of losing nearly everything if the market collapses. Bonds offer more protection for your initial investment. 

3. Tax Benefits

Taxes might pay for our roads and public services, but they also can eat into your hard-earned money. Nobody wants to face an excessive tax bill at the end of the tax year. 

Bonds can come with some great tax benefits, depending on your state and the type of bond you purchased. The interest payments on some savings bonds, for example, are not subject to federal taxes. Better yet, some bonds might not be subject to state or local taxes if you live in the same state where you invested. 

For any tax questions, it’s best to work with a CPA to make sure all your bases are covered. 

4. Accessibility

Some investments require you to be an accredited investor and throw down large amounts of money to even be allowed to take part. In other words, only the wealthy have access to the best investment options.

Bonds are far more accessible to the average person. This makes bonds easy for new investors to start, as well as any non-accredited United States investors (anyone with a net worth of less than $1 million). 

How easy is it to get started with bond investments? Worthy bonds have one of the lowest initial investments around. For just $10, you can start investing in your future and making strides toward a new car, your first home, or the start of a family.

Everyone deserves a chance to invest in their financial security, build their long-term savings, and work toward their dreams. Our mission at Worthy is to give people an easy, people-first way to get there!

5. Support a Cause

When it comes to investing, you might think of large, corporate banks or wealthy bigwigs in towers. Some people are hesitant to even consider investing because they’re tired of traditional finance and a world that often puts profits before people – and they don’t want to be part of the problem.

But where you put your money matters.

With a variety of bond types available, you have lots of choices for what you want your money to accomplish. Depending on the bond you choose, your investment can earn you money while supporting something you care about or making a real difference in someone else’s life. 

For example, a municipal bond in your own city can be a great way to keep the investment focused on public infrastructure within your city or county. A corporate bond can support a specific company you like. 

All Worthy bonds help support community real estate projects as proceeds from our SEC-qualified bonds provide funding to residential real estate developers, including affordable housing throughout the US. In other words, we help investors earn a high return and also support communities across the country.

Keeping those dollars local leads to community wealth, which supports your friends, family, and neighbors rather than the large investment conglomerates on Wall Street.

Invest in Worthy Bonds Today

If you want to make a difference in your long-term savings goals AND have a community impact, Worthy bonds are a great place to start. You can tap into a low-cost investment that yields competitive interest rates while supporting Main Street over Wall Street. 

The best part is you can get started today, and it only takes $10! Learn more about Worthy bonds and the impact investing can have on your financial future.

Post by Team Worthy
January 26, 2024