Explaining Discounts

A discount can work in your favor or against you. If you buy groceries and get a discount, you pay less.

You can lose money if you hold bonds as an investment and sell before the bond reaches maturity.

Discounts When Purchasing

 Your discounts when purchasing can be fixed or flexible.

For example, you can get 10% off all fuel purchases for one month.

Each time you put gas in the car, you can calculate 10% off the total cost of the gas before taxes. This is a fixed discount.

Flexible discounts generally occur when you’re going to be spending more. You may have gotten a discount promotion for clothing.

If you spend $50, you may save $10. If you spend $100, you may save $25.00.

An excellent flexible discount, paired with wise spending, can yield more significant savings than a fixed discount.

If you are a regular shopper at just a few retailers, you can track the cycle of discounts and target your purchases for even more excellent bargains.

For example, you may get points at a particular grocery store for gift cards, which can be used for grocery or fuel discounts.

Knowing the best days for the most points can significantly increase your options for earning a discount. 

 In such cases, discounts often have a short time limit. Pay careful attention to your discount’s “shelf life” to reap the full benefits of your targeted purchase.

Discounts When Investing

 When you buy a bond that you plan to hold until maturity, the discount on the bond’s value may strongly impact your returns if you need to cash out early.

If you’re building a portfolio of high-risk stocks and need low-risk bonds to balance it out, you will want bonds with a low discount or yield to maturity risk.

While their payout will take time, they are a very stable investment.

Higher yield bonds have greater risk and likely a higher discount.

Any time you add bonds to your portfolio, be aware that you may lose access to your funds for a time so you can gain the full benefit of the interest payout on the bond.

Unlike stock dividend payouts, bonds must be held to maturity.

Calculating the discount rate with your financial advisor is critical to ensure you gain the total value of your bond.

Putting discounts to work can earn you more significant dividends and better bargains.

If you’re considering adding bonds to your portfolio, discuss how discounts will impact your yield to maturity.

To put your shopping discounts to work, look for ways to combine bargains for even better deals.

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