Bonds come in many types and names. There are treasury bills (T-Bills), municipal bonds (government bonds), corporate bonds (loaning to a company), asset backed bonds (like a mortgage), and odd ones like convertible bonds (which have the option of turning into the company stock.)

If you’re not looking to scalp the bond market your main concerns with bond investing are:

What is the rate of return I will be getting versus inflation? Inflation is the increase in prices of goods you buy everyday from year to year. If you earn 1% per year on your money, but what you buy goes up 3% you really just lost 2% this year. You need to estimate inflation each year not by what the government says it is, but by what you actually spend most of your money on.

How safe is the bond? All bonds are rated from AAA like the treasury bonds from the federal government to junk bond status. The safer the bond investment the lower yield it tends to return. However, this isn’t always true, sometimes you can find safer investments that are offering more or companies that are rated lower than they should be driving their rate of return up.

What do I think interest rates are going to do in the future? Right now interest rates in the United States are extremely low. Therefore, odds are interest rates will rise over the next 5 to 10 years. This means any bond I purchase now will likely go down in value over time. This doesn’t mean I shouldn’t buy the bond, I’ll still get my payment every month or year, but it does mean I likely won’t sell the bond early to get my money back. In this case I know I will be holding the bond a long time. If you think interest rates will be dropping then you are at the best time to buy bonds because you’ll be getting a higher rate of return, plus you’ll get more money back if you sell early.

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For those who are not aware of what the foreign exchange is, it’s where the currency of the different countries are traded. The buying of one currency while simultaneously selling another. It’s the largest exchange in the world with the daily turnover exceeds $1 trillion. The pairing of two currencies are traded and valued against the other. A couple of examples are the US Dollar/Euro and the Japanese Yen/US Dollar. Most of the currency transactions will involve on of the major currencies (US Dollar, Euro, the British Pound, Swiss Franc, Canadian Dollar, Japanese Yen and the Australian Dollar.

The foreign exchange operates twenty-four hours a day through an electronic network of banks, corporations as well as individual traders. The exchange does not have a physical location where the trades are made like the other major exchanges do. The trading day for the FOREX starts in Sidney Austalia followed by Tokyo Japan and moves west around the world toward London, England and the New York. The big players in the FOREX are investment and commercial banks along with the exchanged traded futures and the registered futures commission merchants which consists of the ProEdgeFX. PorEdgeFX trading desk opens Sunday at 2:20pm EST and doesn’t close until Friday at 4:30pm EST.

The prices of the foreign exchange are influenced by the international trade flow as well as investment flows. In a lesser manner the exchange is also effected by the same things that influence the bond markets; economic and political conditions especially the interest rates, inflation and the stability of those countries. Since the impact is short lived, it gives investor the necessary diversification needed to protect against adverse movements in the equity and bond markets.

The exchange works in the same way the stock market works in regards to the bid/ask pricing and has the same type of spread between the two (bid/ask) just as equities do which is the cost of the transaction.

I have recently started play around in the FOREX as part of my investment strategy. I have taken it very slow in jumping in and making any big position in any of the currencies that are traded. I will say that I’ve learned quite a bit in the short time and will continue to educate myself about the foreign exchange world. As I learn more about FOREX I will share my knowledge and experiences with you, here at this site.

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