How to Trade Bonds Like a Pro in Australia?

Many people are interested in the bond market because it is considered relatively conservative compared to trading shares or other instruments. Bonds are thought less risky, but there are still significant risks involved in buying and selling them. As with any investment, you can make money if you know what you’re doing but put the wrong foot forward and risk losing big.

The best way to learn about what’s involved is by joining one of Australia’s many trading courses that focus specifically on trading bonds. Learning this skill alone could open up new worlds for your portfolio, allowing you to diversify your investments while earning yourself some extra income – no longer having to rely on your share portfolio alone.

Bonds are bought and sold just like shares, except they usually trade in larger units. However, the price of bonds can take longer than you might expect to change, so you mustn’t buy or sell too soon after the market moves – if at all. There are other options available for trading bonds – you can buy them on margin, through CFDs (Contracts for Difference), or even use a regular stockbroker who may specialize in this field. It means that there are plenty of great ways to get involved and trade bonds online.

Stable Income Stream

Bonds pay interest (coupon payments) at regular intervals and provide a stable and predictable income stream. The interest rate you can earn on a bond may be higher than a savings account or term deposit. Some bonds, especially government bonds, also have high liquidity, meaning they’re easy to sell if you need to free up money quickly.

Lower Risk

Bonds are a defensive investment and lower risk than growth investments like shares or property. The amount of risk depends on the bond’s issuer: either the Australian Government (lowest risk) or a company (higher risk).

Diversify Your Portfolio

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Bonds are often used to diversify a portfolio. Diversification lowers the risk in a portfolio because some investments are likely to benefit no matter what the economy does. For example, when interest rates fall, bond prices rise, while shares often fall at this time.

Issuers of Bonds

There are two issuers of bonds in Australia:

  • the Australian Government
  • Companies

All bonds have a set value (called the face value) when they are first issued. This is how much you pay for the bond (usually $100 or $1,000). It is the amount you get back if you hold a bond until maturity.

Australian Government Bonds (AGBs)

AGBs are the safest type of bond. If you buy and hold them to maturity, you’re guaranteed a rate of return. You can also choose to sell your AGB before they mature – just like any other bond. There are many types of AGBs, including Treasury Bonds and Treasury Notes.

Treasury Bonds: Have a fixed interest rate for their term (duration). They pay the same amount every six months until maturity. However, the price is not guaranteed at all times because it fluctuates with changes in market conditions, just like share prices do.

Corporate Bonds

Corporate bonds are riskier than AGBs. If the company goes out of business, you won’t get coupon payments and may not get your principal back. Corporate bonds offer higher coupon payments than Government bonds. But, bonds are still less risky than shares. This is because if a company collapses, bonds holders are paid out before shareholders.

In Conclusion

Sometimes, the best way to learn is by doing, so it may be beneficial for you to take part in an Australia Online Bond Trading course before applying for a job in the finance industry or managing your portfolio. An online course will give you plenty of information on the basics of bonds – including what they are, how they work, who trades them and so on – and show you how easy it can be to get started with investing if you come prepared. Knowledge is power, and the more you know, the better you’ll be able to handle any changes that may occur in the future!