Tips to Safely Buy Mini Bonds

While the stock market is dominated by big players who perhaps play with big money too, there can be bonds for the taking that won’t cost the earth. Called mini bonds, they work pretty much like a stock and can be traded like one too yet they can be traded in more reachable numbers of $25 or less. Common among mini bonds are trust preferred securities which emanate from utilities and other companies. The maturity period is medium to long and you pay dividends based on the cash that comes in from the bonds. These bonds are quiet and steady, offering you security and returns.

Despite the Lehman Brothers fiasco, mini bonds tend to be stable when it comes to price, even at the sign of trouble on the stock market. They are also tax free and so they are good choices but do keep a few points in mind when you buy them.  Remember mini bonds act as unsecured loans from companies so some caution is definitely warranted.

Know your mini bond before you purchase. Most mini bonds are used to finance government projects like repair and maintenance of roads, parks and bridges, among others. You have other players too like housing developers offering mini bonds too. Both have much potential but they are not accredited. Mini bonds do not come backed with the reassurance of Moody’s or Standard&Poor. This means you have to do your homework before you decide where to put your money. For instance, there are different issuing criteria to be met with mini bonds and it will serve you well to know what they are.

Do read up on the conditions and risks involved with mini bonds. A careful review in the beginning will save you of much heartache in the end. Mini bonds are long term investment options and they can be great choices too, provided you know what you’re getting into. So read the documentation and literature before you invest.

Even if the mini bonds themselves are not accredited, the issuer’s information will be available. Find out who the issuer of the mini bond is, the condition of the credit rating and whether or not the issuer will be able to honor the conditions of the mini bond. Having this kind of information will help you make informed choices.

Bonds, like stocks and shares, attract their own share of opinions and discussions. Luckily, the internet is full of information and you can read up, ask questions, get advice and share experiences with buyers, issuers and experts alike. This will also help you make smart choices in mini bonds.

Mini bond issuers don’t always pay cash to the buyer. Sometimes payments take the form of products too, like tickets or the company’s products, as in the case of Hotel Chocolat, Caxton FX, John Lewisand King of Shaves. Make sure when you buy mini bonds that you’re signing up for good quality products.

Mini bonds started as a trend for companies to engage with customers and employees directly, addressing the financial needs of all parties at the same time. Make sure you get to share in the earnings too.

 

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