4 Types of Guaranteed Investments

Putting money into guaranteed investments can provide you with an extremely safe way to make a return on your investment. There are a few different types of investments that are considered to be guaranteed in the markets. Here are a few of the different types of guaranteed investments for you to choose from.

1. Guaranteed Bonds

A guaranteed bond is a type of bond that is issued by one entity, and guaranteed by another entity. This type of guarantee takes away the risk associated with the default of the bond issuer. For example, if the company that issued a bond goes bankrupt, the individuals who own the bonds can still receive payment from the entity that guaranteed the bonds. An insurance company, or a government, could be the entity that guarantees this type of bond. One of the most common examples of this scenario takes place in Canada. Certain bonds that are issued by companies are backed up by the Canadian federal government. If these companies go out of business, Canada's government will step in and pay back the bondholders.

2. Income Bonds

Another type of guarantee investment is the income bond. With this type of bond, the face value of the bond is promised to be paid to the investor at some point. In addition, the investor can receive coupon payments from the bond issuer based on the amount of profit that is generated by the company. The coupon payments are not guaranteed, but the principle of the bond is guaranteed. In some cases, you may have to pay a penalty if you cash out the bond early.

3. Fixed Rate Bonds

A fixed-rate bond is a bond that is issued by a company, or a government, that can pay you a particular rate of interest over the life of the bond. With this type of bond, you agree to give the company your money for a specific amount of time. The company then agrees to pay you a set amount of interest at regular intervals over the life of the bond term. At the end of the bond term, the company also will pay you back your original principle that you invested. This type of bond is generally guaranteed because you are considered to be a creditor of the company. If the company goes out of business, your principle has to be repaid before other things can be paid for by the company. Typically, the longer you agree to let the company keep your money, the bigger your fixed interest rate will be.

4. Savings Bonds

Savings bonds are another type of guaranteed investment. This type of investment is offered by the federal government. With this type of security, you will give your money to the United States Treasury and it will earn regular interest. This type of bond is backed by the full faith and credit of the United States government.

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