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Bonds are a beneficial way of rounding out a diverse portfolio with a steadier stream of interest rolling in at set intervals. It’s crucial to find investments with the best bond rates while protecting your portfolio from accruing too much risk. How can you calculate what you will earn in interest on your bond purchases and secure the best rates? 

Before you dive into the world of bonds, here’s what you need to know about finding the best bond rates. 

How to Find the Best Bond Rates

Choose the Right Bond Type

Bonds are a powerful investment strategy with many benefits, but there are no one-size-fits-all solutions. Different types of bonds come with unique advantages, so if you want to find the best bond rates, start by understanding which type gives the most competitive returns. 

Here’s a quick breakdown of three types of bonds to consider: 

  • Corporate Bonds: When it comes to offering the best bond rates, corporate bonds tend to come out on top. These typically pay better interest than Treasury bonds but their risk factor can depend on the company. Some corporate bonds are publicly traded, while others are for private companies like Worthy.
  • U.S. Treasury Bonds: These bonds loan money to the government and offer an almost guaranteed return on investment, but they have long maturities before you can cash in. 
  • Municipal Bonds: Municipal bonds go to state, city, or county governments to fund schools, highways, and more. Keep in mind that they do have lower interest rates. 

Some bonds require a minimum purchase if you want to get a better rate. The more you invest, the better rate threshold you can access. In these cases, you’ll need to be prepared to put down a larger investment if you want the best bond rate.

As a type of corporate bond, Worthy offers a competitive 7% Fixed APY on bonds, and interest compounds daily as soon as you've reached at least a penny in earned interest. Unlike other investment products, there’s no minimum purchase requirement to get the best rate – every bondholder gets a 7% Fixed APY. We invest bond proceeds in community real estate projects to support growth around the country! 

Look for Daily Compound Interest

In addition to looking for the best interest rates for the bonds, investigate the type of rate, too. 

When investing in bonds, always look to see whether they offer compound or simple interest. Simple (non-compounding) interest tends to yield lower financial gains, so most investors prefer bonds that feature compounded interest. 

Why is compound interest so much better? 

Simple interest only gives you interest on your initial investment. 

But with compound interest, your next interest payment is based on your initial investment PLUS the accrued interest from the previous payments. In other words, you’re earning interest on your interest!

Interest can be compounded daily, monthly, or annually. Daily compounding is the best since you’ll start earning that interest on your interest almost immediately. Today’s earned interest will count toward tomorrow’s interest calculation. 

In short, look for bonds with daily compound interest when you’re shopping around. That’s what we offer at Worthy!

How to Calculate Your Bond Rate Returns

One of the most exciting ways to compare high bond rates is to see the numbers in action. By calculating exactly how much you can expect to earn from your returns, you can get a tangible idea of which option is best.

Let’s take a closer look at the formulas. 

Calculating Simple Interest:

Simple Interest = Principal x Interest Rate x Term

For example, let’s say you’re looking at a bond that offers a 5% interest rate and matures in 5 years. You invest $700 to start. 

Using the formula, that means we’d calculate $700 x .05 x 5 for a result of $175 in earned interest. When the bond matures, you’ll get your initial investment back (the $700) for a total of $875 back in your pocket. 

Calculating Compound Interest

The formula for compound interest is a little more challenging, but still very doable. Pull out your calculator and plug in these numbers:

Compound Interest = Principal x (1 + Rate) Number of years – Principal

For the sake of comparison, let's use the same numbers as before. In this case, we’d calculate $700 x (1 + .05)5 years - $700. In this case, you’d earn $193.40 in interest for an ending total of $893.40.

As you can see, compound interest grows as your interest payments grow which is fantastic for your bottom line!

Worthy bonds compound daily, giving you better returns than bonds with simple interest. You can also hold onto the bonds for as long as you’d like, since they don’t have a set maturity date. That means you can lock into a fantastic rate and enjoy it for many years to come!

To get a better idea of how Worthy bonds accrue interest, have some fun running the numbers in our calculator here. This helps you to get a better idea of what your total value will be based on your initial investment, length of time held, auto-purchases, and even rounding up your spare change. 

Tips for Getting More from Your Bonds

Once you determine that bonds are right for your financial future, it makes sense to think about what you need to do to make the most of your investment. Here are our top tips to get the most from your high-yield bonds. 

Hold for Longer

Some bond types come with incredibly long maturity dates – sometimes 20-30 years from when you purchased it! If you sell a bond before its set maturity date, you might incur fees or penalties in the process. Other times, you’ll lose a portion of the interest you’ve already accumulated. If you want to get the most out of those bonds, be sure you’re ready to hold them to maturity. 

Worthy bonds are a type of demand bond, which means you can sell them whenever you’d like without fees or penalties. Some people are tempted to sell their bonds as quickly as possible, especially if they received them as a financial gift

But the advice to keep the bond for as long as possible holds true here, too. If you sell right away, you won’t benefit from the compound interest your bond could have earned over the years it was held!

As your interest grows, so do your recurring payments and ability to reinvest. Think about the long-term plan and hold your bonds for several years to get the best returns. Since Worthy doesn’t require a minimum balance to get the best rate, you can start right away!

Set Up a Bond Ladder

If you’re serious about your bond investments, consider setting up a bond ladder or another form of recurring bond purchases. This means you invest in a portfolio of bonds that each mature at a different point in time. Over the course of ten years, you might have bonds that mature every year. When one bond matures, you can cash out and reinvest the total earned (with interest) in a new bond.

Worthy bonds don’t mature in the same way as other bonds, but the incremental strategy of a bond ladder is still smart. By building up your stash of bonds over time with recurring bond purchases, you can invest in your future gradually without having to lock away a bunch of cash all at once. 

Worthy bonds also make it easy to invest in growing your portfolio with our Roundups. With Roundups, loose change that normally goes unnoticed is put toward a Worthy bond. Once you accumulate $10 worth of roundups, you get another bond.

For example, when you buy a cup of coffee for $5.50, we’ll round up your purchase to $6.00 and put the extra fifty cents toward a new bond purchase. Once you’re up to $10 (the minimum bond purchase amount), you’ll automatically invest that change in another bond! 

Worthy’s Referral Program

As you explore the beauty of investing in bonds, you might find yourself wanting to share the good news with everyone you know! Worthy has a referral program just for this purpose. When you refer a friend and they meet the program requirements, both you and your friend receive a free bond. 

Get with your circle of friends and family to see how you can capitalize on our generous referral program!

Get Started with Worthy Bonds – Just $10!

Whether you’re a first-time investor or a seasoned pro, bond investments are a fantastic opportunity to build up your portfolio. Finding the best bond rates and optimizing your strategy to get the most back can lead to a powerful long-term impact on your savings!

At Worthy, our goal is to shape a better world while supporting Main Street over Wall Street. We believe everyone is Worthy of financial security, and we aim to help you achieve it with our corporate bonds and competitive interest rates. You don’t have to be an accredited investor or among the ultra-wealthy to jump in – all it takes is $10!

Ready to invest in the future you’ve always dreamed about? Get started today!

Dara Albright
Post by Dara Albright
February 29, 2024
Dara Albright is a fintech pundit with distinct expertise in digital and decentralized finance. She possesses a distinguished 32-year career in financial services encompassing IPO execution, investment banking, trading, corporate communications, financial conference production as well as institutional and retail sales. She is the host of the Decent Millionaire podcast, an episodic podcast series that helps people discover the unprecedented wealth creating potential of decentralization, web3 & Participate2Earn Economics, and is the co-founder of DWealth Education, a learn-2-earn EdTech platform designed to bridge digital asset literacy gaps in corporate, government and academic sectors. Albright serves on multiple boards including Worthy Financial, a scaling fintech enterprise and ICAN (Investor Choice Advocates Network), a nonprofit public interest litigation organization serving as a legal advocate and voice for small investors and entrepreneurs.