Bond Investment Strategy

Bonds are a long term investment, so it makes sense to have an investment strategy when it comes to bonds. It is good to diversify; don't put all your money into one type of bond, or into one area. It is good to invest in different types of bonds, including the shorter term Treasury Bonds and Treasury Notes. It is good to stagger your investments, so that you have bonds maturing at different times.

The Series EE and I bonds have a $5,000 limit per year on paper bonds, and another $5,000 in paper bonds. There is no limit on how many bonds you can own though, so you can invest $20,000 per year in the paper and electron bonds of these types. You can also invest in the Treasury Bonds and Notes that have shorter maturity times. Treasury Notes can have a maturity from 2 to 10 years, and Treasury Bonds usually take longer than 10 years to mature. The 30 year Treasury Bond is not as popular as the 10 year Treasury Note. The good thing about Treasury Bonds and Notes are that they are marketable, and you can sell them on the secondary market.

One bond investment strategy is the buy-and-hold strategy. With this strategy you purchase the bonds and hold them until they mature. You will then have doubled your investment when your bond reaches maturity. Another strategy is to create a laddered portfolio; this is where the Treasury Bonds and Treasury Notes come into play. A Treasury Note is a bond with a shorter time till maturity.

The bullet strategy is another good strategy for preparing for your financial future. Parents who want to prepare financially for their children's college education sometimes invest in zero coupon bonds. The zero coupon bond does not accrue interest; you purchase the zero coupon at a fraction of its face value. When the bond reaches final maturity you receive the face value of the bond, which is a very good strategy if you want to buy a home or put kids through college in the years to come. The investor, using the bullet strategy, may want to invest in bonds with staggering maturities. You, as an investor, may want to purchase several 15 year bonds, and several 10 year bonds 5 years later, and all your bonds would mature at the same time. You could then cash in those bonds to use for whatever purpose you choose.