I'm in college and looking to invest a small amount of money ($1200) and I'm told bonds are one of the safest bets. The payouts don't look great though and are only just better than bank savings. Should I really be putting money in bonds?

If you're in college maybe it's better to invest in your college education with the books and trips and whatever else you need to pass your course. Once you get your college degree you can get a job with it and trade with the more secure income that would bring.

Remember to account for management fees so bear that in mind when investing. Bonds work better with long term investment so you need to see what your preferred term of investment actually is.

From what I've been told, it really depends on what your investing aims are, ie, length of span you're looking to invest for. If you're looking for a 5 year investment then maybe it'll work out, but if you're only talking about 1-2 years you may find the yields are not so attractive after all.

It depends how long you're goanna hold the money. Assuming you're going to hold for a long period of time, without a doubt invest it in NO -LOAD mutal funds. You'll pay less fees to the mutual fund company with NO Loads than loaded funds. With only 1200 bucks, individual stocks might be too risky. But over a long period of time, the stock market performs better than the bond market. History tells us this. But if you'll need the money soon and your risk tolerance is low, buy bonds.

I think bonds can be a good investment as part of an overall portfolio. I think you need to balance things out. I tend to be more conservative, so for me I would have a nice chunk of bonds, a share of blue chips, and then a percentage of high risk stocks. Someone with more risk in their blood would probably up the risk side and go down on the bond side.

I consider my bonds a safety net to carry me through. If I had nothing left but those investments would I be okay. Then the rest is gravy.

I will also often reinvest profits from high-risk investments into more bonds.

I think that's a very fair comment - diversification in a portfolio makes it stronger, in my opinion.

I'm more of a risk taker. Always have been. But that's a personality trait of mine that has cost me big in the market over the years. But having said that, if you're young, I think the majority - not all necessarily - of one's portfolio should be in "QUALITY" stocks or funds. Not the garbage that was predominant in the dot.com era.

I'm definately not a pro when it comes to investing, but we did invest in some bonds for my daughter when she was younger. What we got were the really slow ones (buy $100 one now and in X amount of years, it's worth $200). I like them, if you have the money to set off to the side and don't want to worry about it. When those matured, I just turned around and cashed them in, then bought more new ones. Slow growth, but growth nonetheless and something that you aren't as likely to spend.

I think when your kids are young is the time to put the money in quality stock funds - so long as you're not touching the money for a number of years. The growth on those will definitely outperform bonds. But the key is they have to be quality - not garbage like a dot com fund. Find a Fidelity fund with quality stocks in it and a history of good return. Of course, this is all in my humble opinion only.

What would be your suggestion on deciding what are good bonds and what are bad ones, Belson? Is there any way of finding out? I know,with mine, it was just kind of hit and miss because I really didn't know. Curious if you'd have any advice on that one.

It sounds to me as though the person posing the question is somewhat young - college age - and the tolerance for risk and therefore potential higher returns would lead me to recommend not investing in bonds. For 1200 dollars the return on bonds is next to nothing and in fact may not even keep up with inflation. The fact that at your age you are looking to invest your money is great. Ignore the advice to spend it on books and trips. When you are older you will be able to buy a bookstore in a faraway land if you instead save your money and invest it.

Belson's advice sounds about right to me - no load mutual funds offer a large base of investment options while being moderate risk for the most part. There are high tech funds and funds specializing in index incestments as well as low-cap and mid-cap funds all of which might be attractive to a younger investor.

If you have your heart set on owning a slice of Apple or Google or whatnot then consider invetsing through a vehicle like ShareBuilder and not using your 1200 dollar investment on a single source. Build those out over time instead.

Anarch: I honestly don't know enough about Bonds to give you any intelligent advice. Does anyone else know a decent amount about bonds to help Anarch?

But just as an aside, I found an interesting article about I-Bonds (Inflation fighting savings bonds.) According to this article, anyone who's interested in these types of bonds should buy before May 1. The rates might go down by as much as 4%!
http://biz.yahoo.com/brn/060426/18797.html

That is a good article you are sharing, Belson17. If Anarch really wants to invest in bonds, then maybe he should learn more about it by googling things out. Afterall, anything that has to do with investing, has to be done with care and with knowledge thru research.

calleen, I am not sure if you are hoping to build a portfolio or just invest to get some type of return. If you want to be safe, then yes bonds are pretty safe. However, if you are looking to earn a return, then your stocks would be the way to go. Although they are risky and you could lose your money, you could also walk away with a thivker pocket. Just keep notes with the fees involved in which.

Whatever way, study and research first before plunging in. Money is money and it is disheartening to lose a hard earned income.

I totally agree with you feline. Above all, never totally trust a stockbroker! They get paid for actually losing your money and get perks for it. I know this because my ex-boyfriend was going to be a stockbroker and he just couldn’t lose other people’s money to gain for himself. Everyone should do their own research.

I do have one stockbroker but I find the Discount Brokerage houses the best, especially the reps because they are not allowed to tell you what to do. They are just there to guide your buy/sell deal.