What is an index link?

Many wise investors use some of their savings to buy financial securities called bonds. With this type of investment, an individual gives a financial institution or a government agency in exchange for a bond. The security usually has a due date that determines when the investor can return the bond to the financial institution to obtain the original bond costs plus any accumulated interest. The index binding is a special bond for which the value is determined at the current index speed.

Index binding does not have a due date. If the index velocity fails, the value of the binding also decreases, but if the speed increases, the security value increases.

The open index binding is one that can be moved from the area to the area, for example in the 401K plan. Closed index binding can be purchased in limited quantities, usually 100 shares and can only be moved through a licensed broker. In both cases, the buyer may decide whether to be securityVensed by tax or taxable. If it gets interest, quarterly payments are sent to the owner.

Index binding may be a risky investment as the index rates may rise or decline without prior warning. For example, the view of the ten -year bond index of Lehman in 2006 showed that the value was slowly declining each month. Only an open bond can be held for more than ten years. The closed must be processed by a broker who receives a commission for any change. Therefore, many bond holders have decided to maintain safety for a few years longer in the hope of selling an improvement in rates.

In this type of bond, the investment in the dollar (USD) is at least $ 1,000 (USD) and can be purchased through approved federal agencies or brokers. The service fee must also be made at the time of purchase.