Why invest in bonds when there are so many other options? Essay

Why invest in bonds when there are so many other options? Since 1999, the economy has been in a downward trend. The majority of people who had invested in the stock market now known as the great stock bubble or fraud bubble were given a false sense of security and they felt the market would just keep climbing. Were there signs that investors could have looked for to predict the economic downturn? If investors had looked for the signs, maybe they could have changed their direction of investment. This paper will investigate the characteristics of bonds and see if the bond market has proven to be a safe haven for those who were wise enough to invest in it. When the economy is in a downward trend why should more people invest in bonds? A good investment is a timely investment in which people change direction of their portfolio at the beginning of economic swings. The economists monitor timely reports and determine the direction of the economy by tracking ten economic indicators through a select group of economic categories: employment, consumer spending, industrial production and inflation (Updegrave, Ten Indicators). Key items of the Employment Situation Summary focus in on unemployment rate, number of new jobs and help-wanted index. An increase in the number of new jobs and help wanted advertisements suggest a growing or stable economy. Unemployment rate tells the economists where the economy has been, whereas the number of new jobs predicts where the economy is going (Updegrave, p. 2). One important factor in the unemployment rate is that it tells the analyst that the economy has already changed. For example, an increase in the number of unemployed indicates that employers will not meet earnings or expect reduced earnin... ...Strategies. Third Edition. Prentice Hall, NJ, 1996. Noddings, Thomas. The Investor’s Guide to Convertible Bonds. Dow Jones Irwin, Illinois, 1982. Bibliography Belkaoui, Ahmed. Industrial Bonds and the Rating Process. Quorum Books, Westport, Connecticut, 1983. Fabozzi, Frank. Bond Markets, Analysis and Strategies. Third Edition. Prentice Hall, NJ, 1996. Noddings, Thomas. The Investor’s Guide to Convertible Bonds. Dow Jones Irwin, Illinois, 1982. Updegrave, Walter. â€Å"The Economy: Ten Indicators.† CNN Money November 22, 2002 Veale, Stuart R. Bond Yield Analysis: A Guide to Predicting Bond Returns. Prentice Hall, New York Institute of Finance, 1988. CNBC money. Questions and Answers, November 22, 2002.