Zero-coupon bonds can be beneficial for a long-term goal, but should be balanced with other types of investments, such as equities, or bonds that pay interest. Bottom line.

Bonds help add diversity to your portfolio and control risk. But they can be complicated. Zero-coupon bonds are cheaper to invest in than conventional bonds but have some unique characteristics ...

A zero-coupon bond does not pay coupons or interest payments like a typical bond does; instead, a zero-coupon holder receives the face value of the bond at maturity.

Zero coupon bonds are taxed differently because they don't pay regular interest. Instead, they're sold at a discount and reach full value at maturity. Each year, investors must report "imputed ...

A zero-coupon bond doesn't pay interest but it trades at a deep discount and it returns a profit at maturity when it's redeemed at full face value.

Price of Zero-Coupon Bond = $10,000 / (1.025) ^ 20 = $6,102.77. With semiannual compounding, we see the bond offered at an initially deeper discount than if imputed interest were to compound annually.

While there are many different types of bonds, zero-coupon bonds offer unique characteristics compared to other types of fixed income investing. Here’s what you need to know about zero-coupon bonds.

Zero-coupon bonds can be beneficial for a long-term goal, but should be balanced with other types of investments, such as equities, or bonds that pay interest. Bottom line.