Bond Summary Points. These points are only a small part of the information puzzle. Refer to the first section of this manual for tons of information on the internet. Learn as much as you can, and don’t forget to use the basic information.
* Bonds are guaranteed and issued by the bond issuer
* Annuities are guaranteed both by the insurance company as well as each state. Annuities have not lost a penny in the 90 years of their existence. This includes the Great Depression.
* A bond’s daily redeemable value changes continuously. What if you need money for an illness, death, or other reasons? The bond will only guarantee its face value at maturity, which could be up to 30 years.
* Annuities have always the face value. (options available)
Municipal Bond Failure
* Municipal bonds can fail. Current failure rates have been 1/2% for the last 10 years.
Municipal Bond tax
* The income from municipal bonds yield is not subject to federal or state taxes, but…the income is counted against the taxable limits on social security!
High Yield Bond High risk?
* High Yield Bonds can be defined as corporate bonds. Higher yield generally indicates greater risk. Moody’s will publish ratings, and Morningstar will display the bond rating for mutual funds. Be informed. What would be the true yield if a bond in a mutual fund failed?
Annuities: A Simple Move
* Consider the combination of risk/reward and ratings. Bond funds can’t guarantee the availability of money if it is vital and urgent. It is easy to show both the fees charged by the fund and the calculated yields.
Notes and Debentures
* Notes and debentures are the lowest form corporate safety. They are guaranteed by the good reputation of the issuer, and they always last in a liquidation situation. Show your prospect the prospectus by downloading it.
Callable Bonds Let them Screw You!
* Bond issuers have the right to change the rules as long as they are in compliance with them. If the interest rates are lower (or become more favorable to the bond issuer), the bonds will be called and issued at a lower rate. The bond issuer won’t call the bonds if interest rates are too high. This will result in lower interest for the bond holder than with other new bonds. The bond holder who wants higher rates will need to sell the bonds at a discounted price and may lose their investment. (plus the commission to sell)
Annuity Strategy…YIKES
This would only be possible if there is a track record of decreasing interest rates. The best guess is that they will continue to decline for at least one year. It is a difficult decision. I recommend that you avoid it and instead use the fixed rate. The account will lose value if you find annuities with a bond strategy now. Excellent sales opportunity.
Bond Ratings offer Annuities.
* Let Morningstar Standard and Poor’s, Moody’s, or Morningstar make this sale.
A Prospectus for a GOLD MINE.
* Refer to the prospectus of the issuer for information about risk and reward. You can easily download any prospectus from the internet.
How does ZERO Bond Yield come about?
* Buy a bond on the secondary market and pay a premium. Calculate the yield-to-call and maturity yields. The formula is included. Or, you can have more fun by asking your client to call the broker and let him do the calculation.
Premium, Discounted and Annuity Sales
* A premium is a sale of a bond at a higher price than the issue price. This means that the yield will be lower then the original interest rates. If safety and security are important, you can move the funds to annuity.
* A discount on a bond will result in a higher interest rate for the owner. Explain to the owner that if interest rates rise, any profit made will disappear. Take profit, sell the bond and switch to a guaranteed product. Bonds are the best source of annuity revenue. Why?
* Bonds’ value will fluctuate every second of every hour of the day.
