This would not matter if you intend to hold till maturity.
If interest rates are high then you can 'lock in' that high rate with a fixed interest investment (bond). However certain investors HAVE to buy bonds at all times. Let's say you are an insurance company. You know you have to pay out certain sums of money in the future to maturing insurance policies and you have lots of funds coming in from premiums. You have to invest that money with the certainty of getting your money back to pay for the maturities. This is done, predominantly with bonds.
You need to learn about bond risks, yields, redemption yields, yield curves, duration, modified duration etc.
There is a lot to learn!
Actually as we all saw in the 2009 crash people flock to safety in bonds in times of true crisis, which causes bond rates to drop. I would suggest that historical data shows the best time to buy bonds is when the economy is going good and the best time to buy stocks is when the economy is bad.
When you buy a bond, you are loaning the bond-seller some money.
Let's say rates are 2% right now. That means that if someone sells you a $10,000 bond, you give him $10,000 and he promises to pay you $10,200 in February 2015.
If you turn around and try to sell that bond to someone else in August, then the price you would be able to get depends on how much rates changed.
You would be selling a bond that promises to pay $10,200 in February 2015. That didn't change. If rates stay at 2%, then $10,100 is a fair price for him to pay for a six-month bond.
But if rates went up to 3%, you would have to come down on your price to get someone to buy your bond. $10,050 invested for 6 months at 3% = $10,200 in Feb '15.
So when rates go up, prices for old bonds go down.
Yes its true and you should have bought stock in 2009 when the whole world was in serious recession. Not it is a bit late as we are heading out of recession, but you can still carry on and invest on cheap stocks if you find them.
well im reading about bonds and to me it seems like the best time to buy bonds is when the economy is depressed with interest rates high and is on the recovery soon? would this be true? was the 1970s a good time to buy bonds? please tell me more im having hard time understanding them. say i bought a bond now and next month the fed reserve raises interest rates, does my bond stay same interest but different price?
only the price changes correct? it will increase therefore making my yield for my bond worse?
