You think I should invest money in bonds or bond funds now? The best bond funds could pay three times the interest income they can get on the bench. Even the safest bonds in the world, the U.S. Treasury bond, pay twice as much as a longer term CD at the bank. But before investing in bonds simply to increase interest income, read this.

When buying bonds that are paying money to the issuer as a company or the federal government. These are loans for you and promise to pay a fixed rate of interest and to repay the loan amount on a fixed date in the future.

What is not fixed is the price or value of your investment as you have. Bonds are traded on the open market lot for the people to do. Therefore, its price fluctuates.

For that reason, you may lose money, even in the safest bonds in the world, Treasuries. And you can take a loss, even in the best bond funds, because when you invest your money with them owns a small part of a bond portfolio of large size.

The bond market operates like any other market. Purchase of pressure sends prices higher, and the sale of the ships down.

The federal government borrows money by issuing government securities, like Treasury bonds. Billions of dollars of these bonds safer in the world are owned by foreign countries. Both China and Japan own a ton of U.S. government securities.

The U.S. national debt going through the roof and around the world, including foreign governments, is aware of this. What would happen if and when the world loses faith in the country's ability to maintain their financial commitments to this debt?

When doubt or fear looms, investors sell. If foreign investors start selling seriously Treasuries, bond prices fall. When falling bond prices this has the effect of interest rates increasing. Example: if a $ 1,000 bond, which has a fixed interest rate of 5% corresponds to a price of $ 500, buying for $ 500 get $ 50 (5% of $ 1000) a year of your interest .. . 10%. If, that is, the issuer does not default.

Even the best bond funds can not make money for investors when bond prices are falling and interest rates zoom up. If investors can invest money in a Treasury bond up to 10% a year, what kind of interest would be that demand for the bonds of others?

Fear is the greatest threat to any market, since it generates the sale. The point of this article is not to predict the pessimism for the future of America. The point is this: the bonds and bond funds pay higher interest because they involve risk. Interest rates are at historically low levels and the temptation for investors to load up on bonds is high.

History shows that interest rates fluctuate. In the early 1980s could make 15% interest and some experts predicted the rate only continue to climb. They were wrong, and if you think that charges at this time can only continue to decrease their time to think again.

The above scenario is my greatest financial nightmare for this country. If there is or not … in the not too distant future interest rates will rise and fall in prices of the bonds. If you own bonds when this happens, you lose money, even if it remains the safest of bonds in the world or one of the best bond funds.

Even the best bond fund involves risk, because bonds fluctuate in value. When interest rates to the north, south bonds. Here is your best strategy bond fund investments to earn higher interest on bonds offer income while reducing the risk of significant loss.

Our investment strategy consists of three different bond funds, and four basic steps. The three are: high quality, short-term, high-quality, intermediate term, and higher performance (but not junk) bond fund through long-term.

The short-term fund is the safest and the least paid dividends or interest. It fluctuates less value than the other two interest rates change. Intermediate bond funds pay more interest, but are subject to greater risk and price fluctuations. As interest rates rise may lose significant value, and should gain in value when rates fall. Bond funds long term magnify this effect and are more risky. That's why we exclude it from our investment strategy.

First, maintaining its low cost of investment by investing in no-load funds. To reduce costs further to go with the variety of indices. For example, if no intermediate load index funds to bonds. Second, invest equal amounts in the three different investments. Third, set them all so that all dividends are automatically reinvested to purchase additional shares.

Fourthly, rebalance at least annually to the value of the three is still almost equal. For this, the movement of money between them. For example, if the higher performance becomes a value lower than short-term funds, money is moving to be the same again.

With this investment strategy in place that you have built in defense working for you because you buy more stocks and bonds fall in the middle sector. First, reinvested dividends (interest) to buy more shares as prices fall. Secondly, you rebalance and move money to fund short term the most volatile, like rising interest rates sent prices to their funds more aggressively.

You will be buying shares increasingly lower prices. This reduces the average cost per share … so when interest rates level off and head down your losses have been minimized. And their bond funds should recover as soon as possible and show a profit before interest rates go back to where you started.

The investment strategy is simple only buy the best bond fund you can find and keep. The problem here is that if interest rates rise significantly and remain indefinitely in the upper levels, investment in bonds could be under water for years.

People invest in bonds for higher income they pay. With interest rates at historic lows, the risk of losses due to rising interest rates may outweigh the benefit. Do not buy bond funds, without an active investment strategy.

This is the first question they ask me all the time. When it's good to invest?

In truth, the answer is simple – everywhere. This is because the golden rules of investment are spread over all his money and not put all your eggs in one basket.

In practice, the way he does is a bit trickier, but still can be done easily with a little thought and research.

If you have money to invest and not sure where to start then do not worry. There are some rules that can stick to that will help you put a list of funds together before you know it.

Here they are:

Understand your risk profile

This means you should find out whether you would be happy to invest in riskier assets, or if you prefer a little more security and invest in less risky assets. In general, assets that are higher risk are more likely to fall in value and more likely to go up in value more than other investments. This is the risk ratio is high, as they could go either way, but the pay for this uncertainty can be very rewarding.

You can calculate how risky it is ready to be with her money (your investor profile) watching how much money they are investing a lot compared to what you have (ie whether it can meet short-term fall in economic value), if you are the type of person who suffers sleepless nights if the money is worth and how you are well informed about the investment as this will help you understand the risks better, so you worry less if they get in value for a short time.

Once you know more about how much risk you are running you are ready to begin searching for funds.

Investing in a mix of sectors

The more they can spread their investments around the least likely to be exposed to one sector or country.

The type of equity sectors that investors tend to invest in the UK are the bonds (corporate and government), the UK and Europe, international equity, emerging markets funds and smaller companies.

The bond funds are generally lower risk and offer a lower yield, but more predictable, while equity funds are higher risk and may provide greater returns. Risk of company funds smaller and emerging markets funds are higher than normal capital funds, but have the potential to provide even more the rates of return.

A rule that people find helpful is to have your age (eg, 40) and invest that percentage in bonds (eg 40%). Then spend the rest of his money through venture capital funds such as those mentioned above.

I must say that there are many other types of funds and many different sectors, but the ones mentioned above are simply the most popular and main areas that people tend to start, especially if they have experience.

Keeping long-term

Investing is not a short-term play. If you are investing in the hope that you can make easy money then unless you really have done their homework this is not much more than a game. Real investment is about hunters a wide range of areas for investment and holding them for a long period of time. During that period there's no reason you can not cream off some profits when the time is right or sell some of the benefits of investing in other funds that may have fallen in value.

Monitor your funds

It is always useful to be able to control their investments at any time. Whatever you invest in ensuring that you invest through a service that offers online access to ratings for you to check the value of your investment at any time. In addition, you want to be able to buy and sell your investments whenever you need.This will also help ensure that their investments remain suitable for you and your needs over time.

Note: None of the above information constitutes a personal recommendation.

Good luck!