Your Questions About Investing In Bonds

Daniel asks…

How does one actually LOSE money off of investing in T Bills/Bonds?

I am thinking of starting my own T Bill ladder and was warned many times that one would have to be cautious investing in T Bill’s because one could lose their money, however articles and blogs never really specify how (besides the initial investment), Does anybody actually know how you could actually LOSE money?

Justin answers:

With both T Bills, bonds, and long term CD’s, you sign on for a fixed interest rate. If you have to sell any of it before the term is up, and if the interest you are earning is less than current interest rates on similar products at the time you want to sell, your investment is worth less and you couldn’t find a buyer for your $10,000 bond which pays 2% when he could buy a $10,000 which produces 5%. So your bond would have less value to a buyer, and you might sell, but for less money than you paid for it. (He might offer $7500 because he could get more than twice the interest from a different bond.)

Chris asks…

Can a company choose not to pay the interest on bonds that they issue?

I’m considering investing in bonds, issued as subordinated debt by a company. While I doubt that the company will ever go bust, is it possible for it to choose not to pay the interest on a bond, as opposed to simply defaulting?

Justin answers:

Deciding not to pay interest on a bond is absolutely defaulting. On YA there is this misperception that “default” = “debt repudiation”. That’s just not the case. If you miss an interest payment on a bond, you are in default on that bond. That means that the bond becomes immediately due and payable. Since missing an interest payment puts you in bankruptcy, the company will not pay interest on any bonds (and if they did, the bankruptcy court in the US would require that receivers of the coupon payment give it back in a clawback since that was unauthorized preferential treatment of a creditor). That means all the bonds are due and payable.

The “subordinated” part is only important for determining your recovery rate in a bankruptcy.

Robert asks…

I’m thinking of investing in bonds. Is Pioneer Strategic a good choice?

Justin answers:

It is ok for a bond fund but if you invest in the A shares, you need to realize there is a front end load of 4.5%. There are a couple of other things you need to be aware of. There are no load funds that have similar yields and returns such as Fidelity Strategic Income. It has no load and a slightly lower expense ratio about 0.3% lower. It does however have a higher minimum investment amount $2500 vs $1000 if that is a consideration. Another thing to be aware of is that a bond fund such as these might be appealing for their current returns but long term they are not too appealing. If inflation heats up they can be disasterous.

Paul asks…

i need to know about bonds! investing in them??? help?

im soon about to turn 18 and start working and im thinking of saving money to buy a bond, im thinking if i buyt a bond for 20 thousand dollars,, wat happens after tht wat do i get!? people tell me the money doubles and u cant lose in bonds at all? any expert advice? gimme ur e-mail if you know about bonds i would like to chat! thnx!
can someone answer my question??? thts not what im askin lol!

Justin answers:

Bonds are one step above putting your money in a savings account….lucky if you keep pace with inflation/taxes……like Cramer says there is always a bull market out there in the global stock markets… of the easiet ways is just following the trend ie Latin America FLATX, Natural Resources RIO, Agriculture POT, Gold GLD, oil USO, at the same time when markets have been dropping you can short them SDS, DUG, DOG, etc… I became a millionaire investing in stocks for 15 years and never invested in bonds… want to know how, read The Successful Investor by William O’Neal

Donald asks…

Which online trading tool is best for investing in stocks and bonds?

I would like to start trading and investing but I don’t know which company should I open the trading account with. Can someone tell me which one of the following is the best? and why?


Justin answers:

All major brokerage firms provide their clients with on-line services, including trading platforms, latest market & financial news and research.

Customer need to select the site that is best for them. Traders have requirements in a site, while investors have other requirements.

Although most sites are geared to general securities and commodities, however customers may have special needs for the types of products they trade, and the markets in which they trade. For example I use Fidelity for investing. Scottrade for equities trading and ThinkorSwim for option trading

It seems that the most popular firms for on-line investing/trading all of which provide excellent platforms and services are; Scottrade; Chas.Schwab; TDAmeritrade; Fidelity; E-Trade and Thinkorswim. In your situation, you may be best served if you select Fidelity or Ameritrade since they provide more products and services for investing rather than trading

Joseph asks…

Ginnie Mae bonds invest program and the federal government?

Explain the Ginnie Mae bonds invest program with the federal government and how it works. What are the minimum requirements to be involved in the program and other factors involved?

Justin answers:

What Is a Ginnie Mae?

The Government National Mortgage Association (GNMA) operates as an agency of the U.S. Department of Housing and Urban Development.

It buys home mortgages from the financial institutions that made these loans and groups them into pools of $1 million or more. Ginnie Mae either keeps these pools to sell directly to investors or sells the pools to mortgage bankers and other institutions, which market them to investors.

Ginnie Mae or the mortgage banker continues to collect mortgage payments from the homeowners in each pool, and when you invest in a Ginnie Mae, you usually receive a monthly payment that includes both interest and a portion of the outstanding principal. Alternatively, you may receive monthly payments including only interest, and then receive the principal back when the mortgage matures.

These government agency bonds are also sometimes called Ginnie Mae pass-through securities, since the mortgage payments pass through a bank, which takes a fee before passing the remainder of the payments to investors.

Besides providing a higher return than Treasury notes and having the U.S. Government’s backing against default, Ginnie Maes have another advantage: they are highly liquid and can be resold on the secondary market.

The minimum investment for a Ginnie Mae is generally $25,000. Thereafter, the securities are available in increments of $1. Of course, you sometimes can buy Ginnie Maes that are selling for less than $25,000 at a discount on the secondary market, if their interest rates are low compared to more recent issues or if their principals have been substantially reduced. Finally, you can purchase shares in Ginnie Mae mutual funds for less than $25,000. Ginnie Mae funds or investment trusts buy these government agency bonds and offer shares to the public.

In addition to individual investors, a wide variety of organizations buy Ginnie Maes–for example, retirement pension funds, credit unions, real estate investment trusts, commercial banks, insurance companies, and corporations. Likewise, many different types of institutions issue Ginnie Maes–including mortgage companies, banks, and credit unions. Ginnie Maes are readily available and easy to add to your portfolio.

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Andreessen: Every Time You Sell A Company, You're Falling Short

Andreessen: Every Time You Sell A Company, You're Falling Short

In Marc Andreessen's ideal scenario, every company his venture firm funds becomes a huge success, but never IPOs and never sells to a bigger company. The startup just gets bigger and bigger and there's no exit, says Andreessen. And then, in 13 or 15
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Are we investing enough in infrastructure?

Are we investing enough in infrastructure?

21 to discuss the challenges and benefits of investing in infrastructure in Minnesota and nationwide. "Our region needs an aligned, integrated and comprehensive transportation system to drive economic competitiveness and quality of life," said Cowles
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Minnesota Public Radio
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Student loan repayments – Ways to pay in crisis

Repayment of student loans at a time when one cannot get relevant jobs can be an issue. However, student loan forgiveness plans are designed to help the student loans avoid debt situations.

Education is one of the most expensive affairs for any one these days. Students normally cannot afford to fund the entire amount of their college fees. Thus in order to pay for their education, students tends to take students loan. Now the problem starts when these graduates are unable to secure jobs for themselves. No job means that they would not be able to repay the students loan even. If you are having trouble in repaying your students loan then you must follow some steps. There are various options available which can help you in repaying your debt and in some cases you can even get it forgiven by the lenders.


Okay so this might not be the ultimate thing in your mind but can help you in many ways. Joining such organizations as volunteers can help you with repayment of your loans as well. These programs pay you stipend or some salary against the work you do. Also it gives you an experience letter which can help you in future.

  • AmeriCorps
    What it is: American corps helps in critical needs in states and communities within United States of America. As a member of it you will have to address some disadvantaged youth, teach computer skills, improve health services or even help communities to cope up with natural disasters.
    Benefits of Service:
    Full time members of this organization who stays for complete 12 months of service earn an award of $4725 to pay for college fees, graduate school or any other educational loans. Some volunteers may even get a stipend of $7400 for dealing with living expenses till the time you stay in the service.
  • Peace Corps
    Peace corp is an organization which works for prevailing peace and friendship around the world. It is an agency under the federal government.  It sends across the members or volunteers who have joined this organization to different parts of the world in order to promote better understanding of Americans on those being served and to give a glimpse of the life of those people on the minds of American volunteers.

The best benefit under this is that you get full medical coverage and affordable health insurance after 18 months of your service, if you volunteer under it.

  • Teaching

If you are good at teaching and can take up as a volunteer program then even this can prove to be fruitful for you in order to pay your bills. If you opt for teaching at a low income area then the services taken by you can be compensated by forgiving a part of your students loan amount. For the first and second year of teaching services you would be given relaxation of 15% and for third and fourth year you would be given a relaxation of 20% while for the fifth year the relaxation would be of 30%. Beyond five years there are chances that the entire amount of your loan can be forgiven.

In case of Stanford loans a sum of $5000 of the amount left can be forgiven following the five years of teaching. In certain cases it can be forgiven up to $17500 for some special teachers.

  • Nursing

The Nursing Education personal loans for people with bad credit Repayment Program is a federal program that helps in dealing with the shortage in the number of nurses by helping the nurses who are working with not for profit organizations in helping them pay their education loans. For two years of service they can avail 60% of their nursing education. Participants can also get salary and other benefits which they had negotiated with the employer!

  • Public Service Loan Forgiveness

Those students who are interested in the public service field, may appeal for forgiveness of such debts with the help of Public Service Loan Forgiveness Program. Students who are future public lawyers etc can take help of this option.

Taking to student loan repayment, things have really got tough in the past few years. There are several students who take multiple loans anticipating a better job once they graduate. However, the changing economic scenario has resulted in the job losses for  even those who were considered to be in the most stable of the jobs working for the best of the organizations. All this has shaken the basics of people and in fact all are a lot worried as to what is going to come in the future. Most of the people have lost their investments and others are just struggling to keep the debt repayments in time.

A lot of people are of the opinion that students should not take too many loans. They should keep a tab on their spending and take to the minimum of loans. All this indicates that students have been taking higher amount of loans. However, this may not be correct considering the fact that the Federal student loans have a cap limit on them. Thus indicates that students will need to take loans from the private lenders too, to meet their educational requirements. Other than this there are several other expenses related to accommodation, conveyance, stationary which again requires a lot of money and students are seen to depend on their credit cards to meet them. So, on an average a student may need to take loans around $40,000all of which Federal loans will just be a relatively smaller part.

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Conquering a mountain of student debt

The financial realities of tertiary education are seeing increasing numbers of students having to take out loans in order to fund their education; this coupled with the fact that jobs are harder to come by and cost of living expenses continue to climb, means it is taking students far longer to conquer their mountain of student debt.

Cause of the problem

The cause of the problem is substantial increases in the cost of education in the last decade, exacerbated by poor money management skills. The increase in the price of education has resulted in many matriculants abandoning their dreams of furthering their education while others, in order to study further, can trap themselves in debt many years before they’ll ever draw their first salary cheque.

The National Student Financial Aid Scheme (NSFAS) has paid out in excess of R9-billion in bursaries and loans. Although the uptake of loans is at an all-time high, the organisation recovers a mere R400-million a year in student repayments. High unemployment rates in South Africa are thought to be the main cause of this poor recovery rate. And with delayed payments, students are having to pay increasing interest on the borrowed sum – a state of affairs that could easily spiral out of control and lock young adults into a debt cycle for many years to come.

But it isn’t all doom and gloom. It is possible to minimise the negative impact on a student’s financial future by following these 8 tips.

  1. Know the costs involved. It is important that students who take out student loans are aware of the costs involved and make sure they are informed about how to structure a repayment plan. To avoid any nasty financial surprises down the line it is imperative that you understand, fully, the real costs associated with furthering your education: not only course fees, but additional expenses like textbooks, registration fees and technology which could include laptops, tablets and other study equipment associated with your studies. Draw up a budget when you graduate and include a payment schedule that will see your loan paid off within four years.

If you would prefer to take out a smaller loan for the odd item here and there, cash loan providers like offer small loan amounts repaid over a shorter period of time.

  1. Get a handle on your lender. Never touch a loan unless it is provided by a well-known, registered bank or institution. Always speak to your bank first for sound financial advice.
  1. Quick question: What do you owe? You should be able to answer this question immediately and without hesitation.
  1. Make a plan. Your regular payments plan should be set out by the time you graduate. If you understand the full terms and conditions of your loan, you will know that missing a payment will result in additional interest being charged on the loan, resulting in your debt growing instead of diminishing over time.
  1. No pain, no gain. It’s a fact of life. You will need to forego spending money on luxuries and trend items until you have paid off your loan. Practice good financial discipline from the start; you’ll avoid paying out extra interest on delayed payments.
  1. Consistency is the name of the game. You may not have had much luck yet trying to find a job but whatever you do, never stop paying your loan. In the real world, your grades are not the only score you need to worry about – your credit score has the power to seriously hurt your financial future. These scores are often used by insurance companies to determine your risk profile which could see you paying higher premiums, as well as prospective employers who can use your score to gauge your level of financial responsibility. So, contact the lender and arrange an affordable repayment solution. But do not stop paying altogether!
  1. Keep your lender on speed dial. You could be penalised if you change your phone number or address without telling you lender so make sure you stay in touch until that loan is paid off.
  1. If in doubt, ask. A Certified Financial Planner can help you with the entire student loan process so if you have any doubts, you do not have to go it alone.

Student loan resources:

For a list of bursaries and scholarships see here

The National Student Financial Aid Scheme (NSFAS) is the South African government student loan and bursary scheme. They provide loans and bursaries to students at all 25 public universities and 50 public TVET colleges throughout the country.

Eduloan is an education finance specialist operating in Southern Africa. Since 1996 they have awarded over 750 000 study loans to the value of more than R4 billion.

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Your Questions About Investing In Restaurants Return

Paul asks…

henry invested $12,000 in a new restaurant. sold 2 years later find average annual return?


Justin answers:

PV = -$12,000
Return = 50%

Joseph asks…

I want to invest money about (20,000 dollars) in a small business venture. How much should I ask for in return?

I want to invest money in a restaurant that opened around the corner from my house. I really love the restaurant and it is becoming really popular. They are starting to open new locations all over Los Angeles. I want to invest but i cant buy stock in the restaurant because it is not available yet. I guess the restaurant is too small. I asked the owner if i can invest 5,000 and he said that was too little money. Now i want to ask the owner if i can invest 20,000 but how much should i ask for in return. What is normal in this situation. How much time would it take normally for 20,000 to turn to 40,000 in a situation like this.

Justin answers:

It doesn’t sound like the owner is that eager to take on investors. Maybe he has established debt financing or some partners who are investing. Because of that, I doubt that you are in a position to call the shots as far as return. If you were to invest, your return would depend on whether it was structured as debt or equity. I could not begin to tell you what kind of return to seek, it depends on so many factors.

Daniel asks…

2010 business tax return quick question?

hey guys,

I have a quick question regarding my business tax return for 2010

lets say I have business A selling furniture online that generated 50,000 gross profit in 2010. Out of that I used 30,000 to invest in opening a restaurant that I call business B. The fund was used for sign, decorations, location renting, etc. Would that 30,000 be claimed as business expense ? In short, can you used the profit from a business and invest it in a completely differently business and still claim it as expense in tax return ? or Does it have to be back to the same business for claims (aka invest back to business A in this case) ?

any one with experience please let me know. Thanks!

Justin answers:

2 different business operations each one has to be operated separately and would not be reported or combined on 1 schedule C.
2 separate schedule Cs.
And what makes you think that they do not pay any taxes?
Key words are good detailed records of all ordinary and necessary expenses of the business operation and a daily detailed mileage record or log of all business miles and all personal mileage that the vehicle is actually used for each purpose to help you determine your actual percentage of business use and in the event that you need the written records at some future time you would have them available to you.
All of your gross income from all sources of worldwide income will be reported on your correctly completed 1040 federal income tax return.
Using a receipt book to make a receipt for each time that any one pays you in any way or item or trade for the amount of $$ value that is received at that time and totaling the gross self employed income for the tax year with any other 1099-MISC income that is received after the end of the tax year and entering the total gross $$$ value amount on the schedule C line 1 GROSS receipts from your trade or business
In general, taxpayers may deduct the ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
You would have to be sure that you handle your business deductions correctly for your business operation.
For instructions and forms go to the website and use the search box for publication 334 a very good place to start with examples.
Publication 463 Travel, Entertainment, Gift, and Car Expenses
Use the search box at the website for Small Business and Self-Employed Tax Center
Filing Season Central is your one stop assistance center for filing your business returns. This includes Highlights of Tax Law Changes, Tax Tips, and more.
2 of the seven tax tips for starting a business enclosed below.
#4 Good records will help you ensure successful operation of your new business. You may choose any record keeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
#7 Visit the Business section of the IRS gov website for resources to assist entrepreneurs with starting and operating a new business. Go to the IRS gov website and use the search box for the below referenced material
*Starting A Business
*Operating A Business
*Closing A Business
*Publication 4591, Small Business Federal Tax Responsibilities (PDF 470.1K)

Hope that you find the above enclosed information useful for your situation and good luck to you.

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