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The differences between bonds and notes

By Jakob Jelling
Cashbazar.com

Time is everything.

Generally, if you are looking for information about buying bonds, you will find page after page of information about both bonds and notes. However, unless you have been working in the treasury, it is possible that you will not automatically know what the difference is between bonds and notes. These two types of security are actually very nearly the same. As a result, most companies that deal with bonds and notes will treat the two in the same way.

The only difference between bonds and notes has to do with the U.S. Treasury's definition of the two terms. According to the Treasury, while these are all treated nearly the same when it comes to investment, the major difference has to do with how long the bonds and notes are held. Bonds are held for more than ten years, and a good typical time period for these is twenty years. Notes, even though they are the same type of investment as bonds, are generally held for fewer than or up to ten years. In this case, you are likely to find one, two, and five year notes, as compared to twenty-year bonds.

However, most companies that trade regularly in notes and bonds do not make that particular distinction at all. The reason for that is that while most people know exactly what a bond is, the term "note" is less commonly used when it comes to these investment terms.

Notes and bonds are both very good investment strategies if you want to make sure that you do not lose your money due to investment mistakes. The risks involved are relatively slight. In fact, the only way that you can lose money through a note or bond is if you buy bonds from a business or government that will not be there by the time your bond matures. Since the chances of that are so slim, the bond is a guaranteed type of investment.

If you want to get the most for your investment and you are willing to wait for a while to get your money back out of the bond, you should look into buying long-term bonds. The reason for this is that you will get interest rate payments on your bond before it matures. Therefore, if you have a bond for a long period of time, you will get a lot of money in interest fees first.

About the author
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.

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