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Chances are that you already know investments are an excellent way to grow your wealth and secure a successful financial future for yourself. There are so many benefits to bonds, like the fact that they tend to carry less risk than stocks and can provide a steady stream of income. 

What types of bonds are there and how do you decide which one is right for your portfolio?

There are three major categories of bonds you should consider: Treasury bonds, corporate bonds, and municipal bonds. Let’s dive into what they all are.

U.S. Treasury Bonds

Treasury bonds loan money to Uncle Sam, and they’re a secure way of putting your money to work for you. Investors are almost guaranteed to get their return on investment (with interest) because the government can raise taxes to cover the cost. People often reference the rate of return on Treasury bonds because they’re such a sure bet. 

You can also get started for very little money at just $25 each. 

However, there are some downsides to investing in Treasury bonds: namely, the long maturities before you can cash in on them. These are often issued in maturities of twenty to thirty years. If you want to see the full value of your investment, you will need to let the money sit this long. 

It’s also worth noting that Treasury bonds also have a lower rate of return, especially compared to Worthy bonds

Corporate Bonds

Corporate bonds are another avenue to explore when thinking about bonds for the long haul. 

For publicly traded companies like Starbucks or Coca-Cola, you can work with a broker to trade these bonds on the public market. The corporation typically uses proceeds to grow operations, such as building new warehouses or facilities. You receive interest until the bond reaches its maturity or you trade the bond.

Compared to Treasury bonds, you’ll likely see better returns on corporate bonds. You may also find that some corporate bonds have shorter maturities of five years or less while others will rival the Treasury bonds seen in the last section. 

The downside? Depending on the company you invest in, corporate bonds can be riskier. If the company you invested in falls on hard times, your interest payments (and the return on your initial investment) may suffer. Because of this, there’s an inherent risk to investing in corporate bonds that may not suit every investor.

Corporate bonds also tend to have much higher initial costs, often starting at $1,000.

Worthy Bonds

Worthy bonds are a type of corporate bond, but we run things a lot differently than publicly traded corporations. Instead of selling bonds to line the company’s pocket, our bonds are structured for community impact that you can feel good about.

Instead of taking all the proceeds for ourselves, we lend the money you invest for community real estate projects. Your investment helps build up local economies – not the banks, large corporations, or giant investment firms on Wall Street. 

Think of it this way: if you made 50 percent of your investments within 50 miles of your home, what would the world look like? Worthy bonds allow you to do just that. You have the power to radically shift how your community looks and feels by putting your money into projects that can move the needle forward on improving the everyday situation for your fellow citizens. We like to call it investing in Main Street over Wall Street.

Private market bonds diversify your portfolio and protect you from the fluxes of the stock market.   Worthy bonds also come with a competitive yield (7.0% Fixed APY). The interest compounds daily, and while you’ll get more value out of a bond you hold long-term, you can withdraw your funds at any time if you’re strapped for cash. There are no maturity dates like with long-term Treasury bonds. 

You can start investing in Worthy bonds for as little as $10, making this a great option for someone who doesn’t have lots to invest but still wants to build wealth while creating a positive impact on the world around them.

Municipal Bonds

Municipal bonds are the debt securities that you may buy to support state, city, or county governments to fund their current projects. Investments can go toward improvements like building new schools or highways, which can make your community a better place to live. 

Like Worthy bonds, municipal bonds are fairly liquid. You can reap the semiannual interest payments or sell it for the market price of the bond without penalties. They’re also a good way to generate income because their interest payments are exempt from federal income taxes.

However, keep in mind that the current market price might be less than your initial investment. These bonds might seem like a great option at first glance, but they tend to have low interest rates. Be sure to weigh the rates of other bond types to make sure you can do the most good for your savings goals.

Get Started with Worthy Bonds

Everyone deserves to invest in a better future for themselves and their community, no matter how much money they have in the bank. Bonds can be a fantastic starting point for new and experienced investors alike, and educating yourself on the options is just the first step!

Worthy offers low-cost bonds with extremely competitive interest rates – and you only need $10 to get started! We believe in a people-centric approach to investing your money that makes a real difference to communities.

Let us help you take the next step into your financial future! Check out our investment calculator to estimate your potential earnings or get started right away.

Post by Team Worthy
January 26, 2024