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I've been reading about bonds lately just for the sake of educating myself about investing opportunities for the years to come.

Something I don't understand is that nearly every article goes to pains to explain how the value of the bond rises and falls with interest rates, yield, etc, and I see articles with titles like "3 signs it's time to sell your bond."

The reason I find this confusing is because I think if I were to buy a bond, I would be doing so with the intent of holding it until maturity and collecting the annual income off of it. I would not be buying it the way I buy stocks, with the hope that its value would increase for a later resale.

Is that how many people buy bonds? Why? Is there really good money to be made in that way, rather than just taking the interest from it like a guaranteed stock dividend?

What I mean to ask is, what is the more common strategy? I would have assumed it was keeping it to maturity, but all these articles' focus on selling bonds makes me think I'm wrong.

  • Just an idea - most corporate bonds are callable. If the bond is trading a premium, it might be wiser to sell then wait to maturity. – NuWin Feb 20 '17 at 2:13
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    You can trade bonds (or bond funds) just the same as stocks. Some people buy stocks with the intention of holding them indefinitely and taking the dividends. – Spehro Pefhany Feb 20 '17 at 5:34
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You sell any investment because you need to do something else with the money -- rebalance your investments, buy something, pay off a debt....

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Investment strategies abound. Bonds can be part of useful passive investment strategy but more active investors may develop a good number of reasons why buying and selling bonds on the short term.

A few examples:

  • Timing investments with expectations on the variation of interest rates;
  • Arbitrage by profiting from market inefficiencies (incorrectly priced securities);
  • Negative expectations on the bond issuer's financial condition;
  • Hedge interest rate risks by varying positions in fixed income securities such as bonds.

Also, note that there is no guarantee in bonds as you imply by likening it to a "guaranteed stock dividend". Bond issuers can default, causing bond investors to lose part of all of their original investment. As such, if one believes the bond issuer may suffer financial distress, it would be ideal to sell-off the investment.

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