Real Estate Investing

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Real estate investing is one of the most attractive ways of making good money (that is if you do it correct). Moreover, real estate investing is also a lot of fun. A lot of people practice real estate investing as their core profession and, in fact, make a lot of money that way.

Real estate investing is really an art and, like any art, it takes time to master the art of real estate investing. The key, of course, is to buy at a lower price and sell at higher price and make a profit even after paying all the costs involved in the two (buy/sell) transactions. Generally, people are of the opinion that real estate investing makes sense only when the rates are on the rise. However, real estate investing for profits is possible just about any time (and as I just said, real estate investing is an art). Here is a list of tricks that can make real estate investing profitable for you:

1- Look for public auctions, divorce settlements and foreclosures (bank/FHA/VA): Since quick settlement is the  preference here (and not price), you might get a property at a price that is much lower than the prevailing market rate. You can then make arrangements to sell it at the market rate over a short period of time. However, make sure that the property is worth the price you are paying.

2)    Looking for old listings: The old listings that are still unsold may provide you with good real estate investing opportunities. Just get hold of an old newspaper and call up the sellers. They might have given up hope of selling that property at all and with a bit of negotiation you can get the property for a real low price.

3)    The hidden treasure: A really old (and dirty) looking house may scare off buyers. But this might be your chance for real estate investing that can yield good profits. So, explore such properties and check if spending a bit on them can make them shine. You can get these at very low prices and make a big profit in a short time.

4)    Team up with attorneys: There are a number of attorneys who handle property sales on behalf of sellers or in special circumstances (like the death of the property owner). They might sometimes be looking to dispose off the property rather quickly and hence at a low price. Be the first one to grab such real estate investing opportunities and enjoy the profits.

5)    Keep tab on the newspaper announcements: Property sell offs due to deaths, divorce settlements, immediate cash requirements and other reason are frequently announced in local papers. Keep track of such real estate investing avenues.

Written by mcphat

select: More Real Estate Investing Articles

What is an Annuity

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An annuity pertains to a number of payments, deposits or withdrawals, generally equal, that are transmitted at frequent intervals bearing compound interest. And they do not have to be annual as the name might imply, instead are given to any sequence of payments, identical in all instances. Irrespective of whether these payments are annual, semiannual, quarterly or monthly.

Basically, two practical phases for an annuity exist, and these entail one phase that sees a client depositing and accumulating funds into an account (otherwise referred to as the deferral phase). A second phase involves the client taking receipt of payments for a given period (known as the annuity or income phase).

In  the course of income phase a service provider such as an insurance company can effect due income payments for a certain amount of time, or proceed until the death of the client (annuitant). In each case, annuitization on a lifetime basis almost always comes with a death benefit guarantee for a period of (say) ten years.

On the other hand, deferred annuities are those contracts that have a deferral phase and a mandatory annuity phase. Such annuity contracts can be tailored such that they only support an annuity phase, and are referred to as immediate annuities, although this may not always be the situation.

Immediate annuity

The distinctive characteristic of the immediate annuity relates to the fact that it serves a means for administering savings using a tax-deferred growth factor. A non-qualified immediate annuity faces a tax treatment that sees each payment comprising a tax free combination of a return of principal in addition to income (taxed at ordinary income rates). However, immediate annuities that are funded as an IRA are not included in the above tax arrangement.

It is also practical to customize the payments under an immediate annuity in such a way that they differ with the performance of a given set of investments, most often bond and equity mutual funds (variable immediate annuity contract).

Taxation and supervision

In general, the federal tax treatment of annuities is governed by the Internal Revenue Code. Variable annuities are governed by the Securities and Exchange Commission (SEC), while the sale of variable annuities is supervised by FINRA.

According to the Internal Revenue Code, the maturity of an annuity value in the course of the accumulation phase is tax-deferred, which applies to annuities possessed by individuals. This policy is largely attributed with the popularity of deferred annuities. The tax code also goes further to stipulate that benefits from annuity contracts do not necessarily have to be in the form of a fixed stream of payments (annuitization).

According to the tax regulation Section 1.72-5, whenever an annuity contract is acquired with after-tax funds, the contract bearer upon annuitization is in a position to recoup his basis pro-rata in the ratio of basis divided by the expected value (exclusion ratio). Following the recovery all of basis, then 100% of the payments are liable to ordinary income tax.

 

Written by George Chapungu

An annuity pertains to a number of payments, deposits or withdrawals, generally equal, that are transmitted at frequent intervals bearing compound interest. And they do not have to be annual as the name might imply, instead are given to any sequence of payments, identical in all instances. Irrespective of whether these payments are annual, semiannual, quarterly or monthly.

Basically, two practical phases for an annuity exist, and these entail one phase that sees a client depositing and accumulating funds into an account (otherwise referred to as the deferral phase). A second phase involves the client taking receipt of payments for a given period (known as the annuity or income phase).

In  the course of income phase a service provider such as an insurance company can effect due income payments for a certain amount of time, or proceed until the death of the client (annuitant). In each case, annuitization on a lifetime basis almost always comes with a death benefit guarantee for a period of (say) ten years.

On the other hand, deferred annuities are those contracts that have a deferral phase and a mandatory annuity phase. Such annuity contracts can be tailored such that they only support an annuity phase, and are referred to as immediate annuities, although this may not always be the situation.

Immediate annuity

The distinctive characteristic of the immediate annuity relates to the fact that it serves a means for administering savings using a tax-deferred growth factor. A non-qualified immediate annuity faces a tax treatment that sees each payment comprising a tax free combination of a return of principal in addition to income (taxed at ordinary income rates). However, immediate annuities that are funded as an IRA are not included in the above tax arrangement.

It is also practical to customize the payments under an immediate annuity in such a way that they differ with the performance of a given set of investments, most often bond and equity mutual funds (variable immediate annuity contract).

Taxation and supervision

In general, the federal tax treatment of annuities is governed by the Internal Revenue Code. Variable annuities are governed by the Securities and Exchange Commission (SEC), while the sale of variable annuities is supervised by FINRA.

According to the Internal Revenue Code, the maturity of an annuity value in the course of the accumulation phase is tax-deferred, which applies to annuities possessed by individuals. This policy is largely attributed with the popularity of deferred annuities. The tax code also goes further to stipulate that benefits from annuity contracts do not necessarily have to be in the form of a fixed stream of payments (annuitization).

According to the tax regulation Section 1.72-5, whenever an annuity contract is acquired with after-tax funds, the contract bearer upon annuitization is in a position to recoup his basis pro-rata in the ratio of basis divided by the expected value (exclusion ratio). Following the recovery all of basis, then 100% of the payments are liable to ordinary income tax.

 

Structured Settlement Annuities And Retirement

Structured settlements are agreements in which an insurance company or,  in situations involving a tort case,  another party recompenses an individual a previously discussed amount of money for an allotted amount of time. These actions are usually taken in response to an accident or liable, on the part of workmen’s comp.  Also annuities can take another form, such as investments in stocks and or bonds in order to provided added securities to present and future investments, which you can buy at an insurance company.In order to be compensated for injuries, in which another party is liable, or to protect and increase retirement savings and funds, there are steps and precautions that need to be understood and taken.  This web page will provide procedural and basic implementations in order for you to have the information that is needed to make, follow through, and benefit from structured settlements and annuity claims.

Structured settlements payments are separated into varied or equal amounts of payments over a span of time. But there is another option, as previously discussed, there is a third option in which you can receive all of your structured settlement at once. And that action is selling structured settlements. Companies like J.G. Wentworth buy structured settlements and give you the “lump sum” of your money. Of course there is a percentage taken out by the company, but it is a small price to pay for all of your payments at once. This option is especially great for individuals who need their settlement now and can not wait for every payment. Some prefer the payments over time, it is constant and reliable income that they know will come through. And by allowing these payments, there isn’t a risk of completely obliterating the whole sum of your money anytime soon. But to each his (or her) own. Which ever option is better for you, decide and be content.

Rather you want to buy structured settlements or you are selling structured settlements, and your new at this, it always helps to start at the beginning.

First, as stated in my introduction post, structured settlement payments are to satisfy injury claims issued to liable parties, from insurance to workman’s comp. Structured settlement payments can be dispensed three ways.

1. Equally: meaning that compensation would be disperse in even cash amounts over a period of time.

2. Varied: meaning that compensation would be dispersed over time, in varying amounts.

3. And finally, Lump Sum: meaning you obtain all of your structured settlement cash at once.

All settlements must have a predetermined amount to be paid, so what ever you agree to, on paper, is what you will be receiving. The structured settlement cash is free from income-tax and are generally guaranteed by contract.

Structured settlement annuities are long term financial security, so it is very important to verify and research the credentials of your annuity provider.

How often  structured settlement payments are issued, is a fact that is entered on the settlement agreement that you must adhere to. The amount of the settlement cn be determened by taking thes factors into account; the date of commencement of payment, duration of the settlement payments, and how often these payments are made; your present age, the extent of the danger and hazardous conditions of your occupation, and retirement plans.

For the settlement payments, or pension, to remain tax free, the paymentes that you’ll receive for your personal injury claim should not be altered after both parties have agreed on settlement. And don’t be surprised if a third party disperses your payments. The insurance company can transfer this obligation to another party, but you’ll still receive your structurred settlement.

Now, if you have chosen a structured settlement then you should now that if the payments are made to an estate then while still being free from income-tax there are however not free from estate tax. federal laws estate that a court order is as to be obtained by either the customer or the liable party in order to make the structured  settlement remains tax free. These actions and more are regulated by the structured Settlements Protection Act.

A disclosure statement must be issued three to fourteen days before the transfer agreement. The disclosure statement mentions how much will be paid and when these payments will come to the customers hand. It is recommended that a lawyer be present for these proceeding’s. Someone on your side who can sift through the muddled language and double talk and obtain for you whats need in your settlement.

Find what choice is best for you and go for it. There is no reason why your retirement can’t be as comfortable as when you were working.

Written by sightu

Commercial Bonds

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Commercial surety bonds guarantee performance for a wide variety of business obligations and undertakings. They are required in order to conduct many different types of business.Each specific obligation is described in the bond. There are many different types of commercial bonds.

License and Permit Bonds (L&P Bonds)
These are the most popular type of commercial surety bonds. Contractors, car dealers, Private Investigators and mortgage brokers are among those who must get bonded in most states. L&P Bonds are widely required by municipalities, states, and the federal government, who are held harmless by them. These bonds protect the general public by assuring that businesses comply with local, state or federal codes and laws, and meet their obligations under their licenses or permits. Permit bonds are widely required in order to exercise certain privileges, such as blasting, demolition, fumigation, highway access, and right of way. License bonds are needed in order to engage in certain professions. L&P bonds are also required to operate some businesses, such as car dealerships, employment agencies, health spas, and liquor stores.

License and Permit Bonds (L&P Bonds)
There are thousands of different L&P bonds. This is a partial list of them, those that are most frequently requested. We also provide many other license and permit bonds, so please apply even if you do not see your bond here. We will help you through the commercial bonding process.

Collection Agency Bond
A collection agency bond protects the public by assuring that a collection agency complies with laws, and properly remits the funds that it collects. Apply Now

Contractor’s License Bond / CSLB (Contractor’s State License Bond)
This bond is routinely required before a contractor’s license can be issues, reactivated, or renewed. It assures that a contractor complies with state laws and regulations. Apply Now

Insurance Broker Bond / Insurance Broker License Bond
This bond is required by the Department of Insurance in many states. It protects the public by assuring that an insurance broker complies with laws, and properly accounts for insurance premiums. Apply Now

Lottery Bond
Some states require a lottery bond for an establishment that operates a state-owned lottery machine. The bond protects the integrity of the state lottery system by assuring that the machine will be used properly. Apply Now

Mortgage Broker Bond
This bond is required for mortgage brokers in most states. It assures the faithful performance of a mortgage broker, including proper accounting for the funds that it receives. Apply Now

Motor Vehicle Dealer Bond (MVD Bond) / Auto Dealer Bond / DMV Bond / Used Car Dealer Bond
Most states require dealer bonds in order to license dealerships for new and used cars. This bond protects the public against fraud, misrepresentations, or violations by an auto dealer or its sales force. Apply Now

P. I. Bond / Private Investigator Bond

Most states and municipalities require private eyes and private detective agencies to be bonded, in order to assure compliance with local and/or state laws. The bond amounts vary from state to state, and each has its own bond form. Apply Now

Sales Tax Bonds
These bonds are commonly required for merchants who sell certain products, such as alcohol, cigarettes, and gas. A sales tax bond assures that a merchant will properly collect state sales taxes from customers, remit them to the state, and properly file state sales tax returns. Different sales tax bonds include: Alcohol Tax Bond (for merchants such as liquor store owners) Cigar/Cigarette Tax Bond (for merchants such as convenience stores that sell tobacco products), Fuel Tax Bond/Fuel Distribution Bond/Fuel Use Bond (for fuel fuel suppliers, such as gas station owners). Apply Now

Written by SuzanneKhalil

Commercial surety bonds guarantee performance for a wide variety of business obligations and undertakings. They are required in order to conduct many different types of business.Each specific obligation is described in the bond. There are many different types of commercial bonds.

License and Permit Bonds (L&P Bonds)
These are the most popular type of commercial surety bonds. Contractors, car dealers, Private Investigators and mortgage brokers are among those who must get bonded in most states. L&P Bonds are widely required by municipalities, states, and the federal government, who are held harmless by them. These bonds protect the general public by assuring that businesses comply with local, state or federal codes and laws, and meet their obligations under their licenses or permits. Permit bonds are widely required in order to exercise certain privileges, such as blasting, demolition, fumigation, highway access, and right of way. License bonds are needed in order to engage in certain professions. L&P bonds are also required to operate some businesses, such as car dealerships, employment agencies, health spas, and liquor stores.

License and Permit Bonds (L&P Bonds)
There are thousands of different L&P bonds. This is a partial list of them, those that are most frequently requested. We also provide many other license and permit bonds, so please apply even if you do not see your bond here. We will help you through the commercial bonding process.

Collection Agency Bond
A collection agency bond protects the public by assuring that a collection agency complies with laws, and properly remits the funds that it collects. Apply Now

Contractor’s License Bond / CSLB (Contractor’s State License Bond)
This bond is routinely required before a contractor’s license can be issues, reactivated, or renewed. It assures that a contractor complies with state laws and regulations. Apply Now

Insurance Broker Bond / Insurance Broker License Bond
This bond is required by the Department of Insurance in many states. It protects the public by assuring that an insurance broker complies with laws, and properly accounts for insurance premiums. Apply Now

Lottery Bond
Some states require a lottery bond for an establishment that operates a state-owned lottery machine. The bond protects the integrity of the state lottery system by assuring that the machine will be used properly. Apply Now

Mortgage Broker Bond
This bond is required for mortgage brokers in most states. It assures the faithful performance of a mortgage broker, including proper accounting for the funds that it receives. Apply Now

Motor Vehicle Dealer Bond (MVD Bond) / Auto Dealer Bond / DMV Bond / Used Car Dealer Bond
Most states require dealer bonds in order to license dealerships for new and used cars. This bond protects the public against fraud, misrepresentations, or violations by an auto dealer or its sales force. Apply Now

P. I. Bond / Private Investigator Bond

Most states and municipalities require private eyes and private detective agencies to be bonded, in order to assure compliance with local and/or state laws. The bond amounts vary from state to state, and each has its own bond form. Apply Now

Sales Tax Bonds
These bonds are commonly required for merchants who sell certain products, such as alcohol, cigarettes, and gas. A sales tax bond assures that a merchant will properly collect state sales taxes from customers, remit them to the state, and properly file state sales tax returns. Different sales tax bonds include: Alcohol Tax Bond (for merchants such as liquor store owners) Cigar/Cigarette Tax Bond (for merchants such as convenience stores that sell tobacco products), Fuel Tax Bond/Fuel Distribution Bond/Fuel Use Bond (for fuel fuel suppliers, such as gas station owners). Apply Now

Understanding Acronyms

Often when reading or listening to a news report, words are used that have no meaning, but are repeated as if everyone is supposed to know them.  You may hear:

“NATO will send troops into the area.”

“OPEC claims high oil prices reflect their costs.”

“The Mayor opened talks with AFSCME before the contract expired.”

Who are NATO, OPEC and AFSCME?

These words are really abbreviations formed from the initial letters of a name or phrase that are sounded out like a word.  NATO is the North Atlantic Treaty Organization, founded in 1949 for common defense.  The US is a member.

OPEC is the Organization of Petroleum Exporting Countries, founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.  Not all members of OPEC have been Middle East countries.

AFSCME is the American Federation of State, County and Municipal Employees, which is a very large civil service and hospital worker union.  AFSCME is a part of the AFL-CIO.  (Please note that “AFL-CIO” is not an acronym, because the letters do not form a word!  We say, “A-F-L–C-I-O)

Acronyms are so common, we sometimes make real words out of them! Can you find the acronyms in this paragraph?

The pop group ABBA held a concert in Pakistan to raise money for victims of the Russian gulags and Gestapo concentration camps.  The music was accompanied by a laser show.  Security was tight, with radar installations posted around the area and scuba divers patrolling the river.  To avoid any terrorist threat, ABBA arrived on a special jet leased from QANTAS fitted with AWACS equipment.  Over million was raised to send Care packages to the victims’ families.

ABBA – Swedish pop group formed in 1972 by Anni-Frid Lyngstad, Benny Andersson, Björn Ulvaeus and Agnetha Fältskog

Pakistan – supposedly, the five Northern Units of British Raj — Punjab, North-West Frontier Province,(NWFP), Kashmir, Sindh, and Balochistan

Gulag – Glavnoe upravlenie lagerei, Russian for “Chief Administration of Corrective Labor Camps”

Gestapo – Geheime Staatspolizei, German for “Secret State Police”

Laser – light amplification by stimulated emission of radiation

Radar – radio detection and ranging

Scuba – self contained underwater breathing apparatus

QANTAS – Queensland and Northern Territory Aerial Services

AWACS – a military aircraft that provides surveillance, command, control and communications

CARE – Cooperative for Assistance and Relief Everywhere

Written by jaccovelli

select: More Municipal Bonds Articles

Issues of Real Estate Investment

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Investment in Real estate in highly risky. As well, the risk varies from time to time depending on the economic conditions. There are several risk, factors which must be considered before investing in Real Estate as an investment strategy. The risk factors in real Estate are genral economic conditions, interest rate, tax implications and changes, cost factors, regulatory impediments and costs, changes in enviornmental regulation and local government zoning regulations and changes and stamp duty and other land charges by the government. If these factors are not considred carefully and compared with other investment strategies then it can cause considerable losses to an investor and will not produce adequate return on investment compared to the risk of investment in Real Estate. However, in appropriate conditions it may produce substancial returns and risk may be lower than other investment strategies. A person who is not expereinced in real estate investment must get professional advise before investing in real estate from licenced financial planners or from a reputable fianacial institution. As well, get advise from real estate Institutions and bodies in a country and from Real estate agents.

In favourable conditions real estate investment can earn a high rate of return to that of other alternative investment strategies. There fore, real estate investment must be considered as one of the investment strategy in a portfolio so that the diversification may play a role in reducing the risk and earn more than adequate return. Some times it may earn more than avarage returns of similar portfolios of investment.

In effect, for any investor real estate invetment is an option. However, it depends on the risk profile of the investor and the risk factors compared to other alternative investment strategies. If real estate invetment is considered as a portfolio then there is more possibility it may produce more than adequte return on investment for the risk. One also must note real estate investment has high risk comapred to other investment strategies.

Top Ten Management on Foreign Bonds: An Overview of a Major Mechanism Through Which The World is Financed

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Introduction

A Foreign Bond is a debt security issued by a borrower from a foreign country in which the bond is exchanged into the foreign countries currency. Foreign bonds must be traded in a financial market, issued within a foreign country, and be denominated. The bonds are normally issued by a foreign body, for example a government, corporation, or a municipality.

The Idea in a Nutshell

Foreign bonds represent a financial obligation of a government or corporation. They have a higher risk because of currency fluctuations. Some counties give nicknames to the foreign bonds to make it easier to distinguish the bonds. Investors purchase foreign bonds and collect at the end of its maturity in hopes of a positive return. There are many risks involved when dealing with foreign bonds. Some examples include fluctuation exchange rates or losing initial investment due to seizure of foreign assets. To minimize the risk, buy high quality funds and hold onto them for an extended period of time.

The Top Ten Things You Need to Know About Foreign Bonds

1.            Many foreign bonds have nicknames given to them by the country they originate from. For example foreign bonds sold in the United Sates are called Yankee bonds, and bonds sold in Great Britain are called bulldogs. This helps distinguish one countries foreign bonds from another.

2.            Foreign bonds have 3 main characteristics. They must be issued by a foegin country or body, it must be traded in a financial market, and it must be denominated in a foreign country.

3.            When a company or government needs to raise money they can issue out foreign bonds for a certain price. The investors get regular interest rate payments for their investment. When the bond reaches the end of the term or matures the investor gets their money back.

4.            A country can either seize or deny all foreign assets. This can lead to military conflict and prohibit its currency from leaving that country. If a country does deny all foreign assets the investor can only spend that currency in the country it was purchased in. in other words the investor cannot convert the assets back to its original currency.

5.            When investing in foreign bonds the investor has a potential risk of losing their initial investment due to the fluctuation of the exchange rates. Currency exchange rates fluctuate because of macroeconomic factors including interest rates. Unfortunately none of these factors can be predicted, which imposes an even greater risk for the investor. Smart investors believe that foreign bonds can be a protection against the falling U S dollar.

6.            In order for an investor to invest in a foreign bond they usually have to know someone at a bank or a brokerage firm such as Fidelity or Charles Schwab. For this reason most people who invest in foreign bonds do so through secondary markets.

7.            There are two main types of currencies, pegged and free floating. Pegged currencies are those that fluctuate with the U S dollar. This protects it from currency risk. Free floating currency fluctuates independently form the US dollar. This makes the bond more risky.

8.            There are two main types of foreign bonds, bonds issued from developed nations and bonds form emerging markets. Bonds from developed nations are efficient and have a lower risk. Bonds from emerging markets are less efficient and have more of a risk because the currency may collapse to a government overthrow.

9.            An investor had two options when investing in foreign bonds they can either purchase individual issues or shares of mutual funds. Investors tend to lean more towards mutual funds because it’s more affordable than the individual bonds. The individual bonds are more expensive because it is mostly for retail investors.

10.            Investors like foreign bonds because it can balance out returns and reduce losses in the United States market. The bonds acts like a hedge or wall against inflation making it cheaper to sustain a successful business.

The Video Lounge

This clip explains what the biggest risk if of foreign bonds today, which is currency fluctuations:

http://www.clipsyndicate.com/video/play/598510/understanding_u_s_and_foreign_bonds_6_what_is_the_biggest_risk_of_investing_in_foreign_bonds

My Take

Almost every developed country participates in foreign bonds. Without them our economy would suffer. Foreign bonds make our economy more diversified. Sometimes foreign bonds can be risky because of currency fluctuations, but with every investment you have the potential of a risk. In my opinion, foreign bonds may be a little too risky to invest in. in order for managers to make educated decisions on purchasing of bonds they need to stay up-to-date on the constant changes in the market.

References

Wacovia(2010). Investing in Foerign Bonds. https://www.wachovia.com/foundation/v/indext.jsp?vgnextoid=3ee475c8011aa110VgnVCM1000004b0d1872RCRD

Business Knowledge Source(2003). Investing in Foreign Bonds. http://www.businessknowledgesource.com/investing/investing_in_foreign_bonds_023623.html

Financial Web. Investing in Foreign Bonds. http://www.finweb.com/investing/investing-in-foreign-bonds.html

Joshua Kennon. The Danger of Investing in Foreign Bonds. http://beginnersinvest.about.com/od/bondsandfixincome/a/aa071104.html

Stan Luxenburg(06/25/10). Foreign Bond Mutual Funds Miount a Comback. http://www.thestreet.com/story/10788924/foreign-bond-mutual-funds-amount-a-comback.html

Admin(10/20/10). The Pros and Cons of the Foreign Bonds. http://www.morgit.com/All/The_Pros_And_Cons__Of _The_Foerign_Bond

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Contact Info: To contact the author of “Top Ten Management on Foreign Bonds,” please email Heather Cosentino at heather.cosentino@selu.edu.

Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:

Management Concepts (http://toptenmanagement.blogspot.com/)

Book Reviews (http://wyld-about-books.blogspot.com/) and

Travel and International Foods (http://wyld-about-food.blogspot.com/).                

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Written by David Wyld
Professor of Management, Southeastern Louisiana University

Introduction

A Foreign Bond is a debt security issued by a borrower from a foreign country in which the bond is exchanged into the foreign countries currency. Foreign bonds must be traded in a financial market, issued within a foreign country, and be denominated. The bonds are normally issued by a foreign body, for example a government, corporation, or a municipality.

The Idea in a Nutshell

Foreign bonds represent a financial obligation of a government or corporation. They have a higher risk because of currency fluctuations. Some counties give nicknames to the foreign bonds to make it easier to distinguish the bonds. Investors purchase foreign bonds and collect at the end of its maturity in hopes of a positive return. There are many risks involved when dealing with foreign bonds. Some examples include fluctuation exchange rates or losing initial investment due to seizure of foreign assets. To minimize the risk, buy high quality funds and hold onto them for an extended period of time.

The Top Ten Things You Need to Know About Foreign Bonds

1.            Many foreign bonds have nicknames given to them by the country they originate from. For example foreign bonds sold in the United Sates are called Yankee bonds, and bonds sold in Great Britain are called bulldogs. This helps distinguish one countries foreign bonds from another.

2.            Foreign bonds have 3 main characteristics. They must be issued by a foegin country or body, it must be traded in a financial market, and it must be denominated in a foreign country.

3.            When a company or government needs to raise money they can issue out foreign bonds for a certain price. The investors get regular interest rate payments for their investment. When the bond reaches the end of the term or matures the investor gets their money back.

4.            A country can either seize or deny all foreign assets. This can lead to military conflict and prohibit its currency from leaving that country. If a country does deny all foreign assets the investor can only spend that currency in the country it was purchased in. in other words the investor cannot convert the assets back to its original currency.

5.            When investing in foreign bonds the investor has a potential risk of losing their initial investment due to the fluctuation of the exchange rates. Currency exchange rates fluctuate because of macroeconomic factors including interest rates. Unfortunately none of these factors can be predicted, which imposes an even greater risk for the investor. Smart investors believe that foreign bonds can be a protection against the falling U S dollar.

6.            In order for an investor to invest in a foreign bond they usually have to know someone at a bank or a brokerage firm such as Fidelity or Charles Schwab. For this reason most people who invest in foreign bonds do so through secondary markets.

7.            There are two main types of currencies, pegged and free floating. Pegged currencies are those that fluctuate with the U S dollar. This protects it from currency risk. Free floating currency fluctuates independently form the US dollar. This makes the bond more risky.

8.            There are two main types of foreign bonds, bonds issued from developed nations and bonds form emerging markets. Bonds from developed nations are efficient and have a lower risk. Bonds from emerging markets are less efficient and have more of a risk because the currency may collapse to a government overthrow.

9.            An investor had two options when investing in foreign bonds they can either purchase individual issues or shares of mutual funds. Investors tend to lean more towards mutual funds because it’s more affordable than the individual bonds. The individual bonds are more expensive because it is mostly for retail investors.

10.            Investors like foreign bonds because it can balance out returns and reduce losses in the United States market. The bonds acts like a hedge or wall against inflation making it cheaper to sustain a successful business.

The Video Lounge

This clip explains what the biggest risk if of foreign bonds today, which is currency fluctuations:

http://www.clipsyndicate.com/video/play/598510/understanding_u_s_and_foreign_bonds_6_what_is_the_biggest_risk_of_investing_in_foreign_bonds

My Take

Almost every developed country participates in foreign bonds. Without them our economy would suffer. Foreign bonds make our economy more diversified. Sometimes foreign bonds can be risky because of currency fluctuations, but with every investment you have the potential of a risk. In my opinion, foreign bonds may be a little too risky to invest in. in order for managers to make educated decisions on purchasing of bonds they need to stay up-to-date on the constant changes in the market.

References

Wacovia(2010). Investing in Foerign Bonds. https://www.wachovia.com/foundation/v/indext.jsp?vgnextoid=3ee475c8011aa110VgnVCM1000004b0d1872RCRD

Business Knowledge Source(2003). Investing in Foreign Bonds. http://www.businessknowledgesource.com/investing/investing_in_foreign_bonds_023623.html

Financial Web. Investing in Foreign Bonds. http://www.finweb.com/investing/investing-in-foreign-bonds.html

Joshua Kennon. The Danger of Investing in Foreign Bonds. http://beginnersinvest.about.com/od/bondsandfixincome/a/aa071104.html

Stan Luxenburg(06/25/10). Foreign Bond Mutual Funds Miount a Comback. http://www.thestreet.com/story/10788924/foreign-bond-mutual-funds-amount-a-comback.html

Admin(10/20/10). The Pros and Cons of the Foreign Bonds. http://www.morgit.com/All/The_Pros_And_Cons__Of _The_Foerign_Bond

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Contact Info: To contact the author of “Top Ten Management on Foreign Bonds,” please email Heather Cosentino at heather.cosentino@selu.edu.

Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:

Management Concepts (http://toptenmanagement.blogspot.com/)

Book Reviews (http://wyld-about-books.blogspot.com/) and

Travel and International Foods (http://wyld-about-food.blogspot.com/).                

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WHAT IS A SURETY BOND?
A surety bond is a written agreement that guarantees the performance of an obligation. Another name for it is suretyship agreement. Surety bonds usually provide for monetary compensation to be paid in the event that a principle fails to perform as specified in a bond. A surety bond is not insurance, but it is a risk transfer mechanisms. It shifts the risk of doing business with the principle from the obligee to the surety.

WHO ARE THE PARTIES TO A SURETY BOND?
There are always at least three parties to a surety bond:
1. The Principal
This is you, your company or institution – the party that gets bonded. You undertake to perform an obligation that is specified in your bond. The principal in a contract bond is the contractor. It is the public official in a public official bond, the one who gets licensed in a license bond, the guardian in a guardianship bond, and so on. Obligor is another word for principal.
2. The Obligee
This is the beneficiary, the party that requires you to get bonded. It might be a person, or an entity such as a company, municipality, or government agency. The obligee receives the bond and its benefit, protection against loss. The surety company compensates it if you fail to fulfill your obligation.
3. The Surety
This is the party that issues the bond, usually a surety bond company. It guarantees that a specific obligation will be met. The surety is financially obligated to the obligee in the event that you do not meet your obligation.
What is a surety bond company?
This is a corporation, usually an insurance company. It can legally underwrite surety bonds.

IS A SURETY BOND LIKE INSURANCE?
No. They are both risk transfer mechanisms that provide for financial loss, and both regulated by state insurance commissions, but there are major differences between surety bonds and insurance.
- An insurance policy is a two-party agreement (insured and insurer), while most surety bonds are three-party agreements (principal, surety, and obligee).
- An insurance policy transfers risk from an insured policyholder to an insurer (an insurance company). A surety bond protects an obligee against losses, not a principal.
- You can buy an insurance policy, but you must qualify for a surety bond. It is a form of credit. A surety bond company will only take acceptable risks, so it will only bond qualified businesses and individuals.
- Insurance companies expect losses, and adjust their insurance rates to cover them. Surety bond companies extend credit, expecting principals to meet the legal obligations of their bonds. They do not expect losses, which severely impact their bottom line when they do occur.
- Insurance companies calculate assumed losses into policy premiums. Bond premiums include underwriting expenses such as the qualification of applicants, but do not provide for losses. A bond premium is a service charge. It pays for the financial backing and credit guarantee of a surety bond company, which allows a company or individual to conduct business.

Written by SuzanneKhalil

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