I'm considering looking into buying bonds, and it seems there are two approaches one can take:
- Buying the bond and holding it until maturity. Here you get the interest (coupon) as agreed upon when it is bought.
- Buying the bond and trading it before maturity. This could be at a loss or gain, depending on the market for the bond at the time you sell.
What would influence someone to take one or the other path? Without knowing much I am drawn to the first strategy, because I want to reduce complexity and not need to worry about timing the selling well. So, if I buy a bond at x% interest, I will know I am getting x% interest over the life of the bond (as long as the issuer doesn't default, of course). It becomes more like a CD, a "set it and forget it" approach.
But...the common wish to reduce complexity often, in my experience, comes at a high cost of profit, and I know, despite inherent laziness, I ought to sweat the details rather than miss the profit. So then, what are the real pros and cons of these two approaches?
(Please correct anything I've mis-stated above, as, again, most of this is mysterious to me still).