Investment Grade Corporate Bond Capital Requirements

Investment grade corporate bonds have a fixed par value, also called the face value, but can move above or below that with market conditions after the bond is sold. The capital input required to buy an investment corporate bond can vary with where and when you buy the bond.

What Affects Your Capital Input?

If you buy a bond at par value for an investment grade corporate bond, it usually is at $1,000 per bond. The par value of municipal bonds is much higher, usually $5,000.

However, once a bond has been purchased, an individual has the right to sell that bond. The movement of interest rates, the bond’s yield to maturity, the bond’s rating and other factors will cause the price of the bond to move up or down.

Investing in a Bond Fund

If purchasing individual bonds is out of your financial comfort zone, there are bond funds. A bond fund, like a mutual fund, combines the dollars of hundreds or even thousands of small investors who each own shares in the fund in line with the amount they invested.

Professional fund managers then buy bonds with the invested funds. The entry cost into a bond fund can be much lower than buying individual bonds.

Each bond fund will have a stated set of objectives and parameters so that you can know if the bond fund is trading in investment corporate bonds or municipal bonds or both.



blog comments powered by Disqus
Scottrade