Investing in Short Term Medium Notes – Better Than Bonds?

When it comes to investments, individuals taking a look at the options may be trying to decide between bonds and notes. The similarities of these two types of investments can make them difficult to choose between. Unlike stocks, notes and bonds represent investments in the debt market. This means that individuals that purchase these types of investments are promised a payment in the future. Rather than owning shares in a company, investors purchase these types of investments because they accrue interest that allows their value to build over time. There are a few key advantages when it comes to investing in short term medium notes rather than traditional bonds.

Notes are issued by both governments and companies for short term investments. These are issued for a specific amount, often individually for purchase by investors. A note’s term can last anywhere from one to 10 years before an investor can cash them in for the original purchase price along with the interest. Notes that are designed with a term of less than one year are more often referred to as bills. Bonds, on the other hand, last much longer than notes, sometimes as long as 30 years. They also feature lower interest rates because of their longer term length.

Both notes and bonds are issued by governments but notes represent an extra level of flexibility for companies since they can create them on an as needed basis. This means that they can create notes when they are needed with specific terms and for specific amounts. This is quite different than the way bonds are released since they are usually created in large sets that are released simultaneously. Notes are also much easier to buy and sell since they are much easier to liquidate on the open market. The level of flexibility that notes provide has made them popular for both companies and investors.

When it comes to reliability, both notes and bonds are equally as trustworthy. When purchased from a stable government, notes and bonds represent solid investments. However, occasionally there is some risk involved. Because notes have much shorter terms than bonds, there is less chance of something going wrong. This is one of the key differences between bonds and notes and one of the reasons why notes are much easier to buy and sell. Even a stable company or government can run into trouble over the 30 year term of the bond.

Leave a Reply

Your email address will not be published.