The maturity of bonds is simply the length of time before the bond is repaid. Bonds are considered safe investments because they have a high likelihood of being repaid upon maturity. The only risk is if the company goes bankrupt, which does not happen with federal bonds. The difference in maturity does affect the potential for profit on the bonds.

Short Bonds

Short bonds tend to have lower interest rates. This means you will be limited in how much you could potentially earn if the bond performs well in comparison to the market. However, short bonds are less risky because there is less market fluctuation affecting their value. Short bonds are more attractive to investors with a lower appetite for risk.

Long Bonds

Long bonds tend to have higher interest rates, increasing the chance for profitability. These bonds are more risky, though, because changes in the price of the bond or changes in inflation are likely to alter its value on the market. High risk investors will tend to favor long bonds because of the higher chance for profit in keeping with the higher risk. Many investment professionals also recommend these bonds for retirement portfolios, such as IRAs.



Settlement Date



The settlement date on a trade is the date when the entire transaction must be settled. This means the stock or bond must be delivered to the buyer, and the purchase price must be delivered to the seller. Contrary to what many may think, the settlement date does not have to be the same day as the trade. On a government bond trade, the settlement date is usually one day after the trade. With a private bond or stock, the settlement date is usually three days after the date of the trade.

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