Many consider a bond investment to be the safer alternative to stocks. It has become so safe, in fact, that many people invest in it without even understanding how it works. If you want to maximize your yield in bond investing, you’ll take notice of these five tips that I have penned for you:

1. Know the key terms with bonds. What do the terms par value, coupon rate, and maturity mean? These are the basic concepts of bond investing that you should be familiar with; if you can explain it adequately to someone, then that means that you understand them.

2. Calculate the yield. Do the number crunching and then compare it with other potential investments that interest you. This is easy to compute; get the interest that the bond pays in a year and divide it by it’s current price, and voila! You have just computed the yield.

3. Be mindful of the bond’s rating. Such ratings indicate the stability of the bond issuer’s cash flow. Review the bond’s rating before you finalize your decision to purchase. The quality of the bond is directly proportional to how high the rating is.

4. Be aware of the bond’s the bond’s interest rate risk. The interest rate and the bond price often go opposite ways; interest rate risk is the term that describes this relationship. A bond’s price is likely to go down as interest rates go up. Long-term bonds are especially susceptible to interest rate risk.

5. Above all, think before you sell. The price of a bond in an ideal situation does not change; it will only do so if you buy or sell it before it matures. Factors affecting this change are the bond’s maturity rate, transaction costs and interest rates. Examine the bond markets carefully if you’re thinking about selling before the maturity. It’ll help you determine if doing so would be easy or difficult.