Question: I inherited some investments recently from my father. Among them are put bonds. Are they different from regular bonds? Can I sell them at BUYandHOLD?

Seth J.

Answer:

Dear Seth,

Put Bonds Defined

Yes, put bonds differ from regular bonds and they are quite uncommon.

With a put bond, the bondholder -- now you -- can redeem the bond at a specific price -- typically at face value, before the bond reaches maturity. In other words, the bond is "put" back to the original issuer.

The most common reason to sell a put bond prior to maturity is if interest rates have increased since the bond was initially issued. Then the money received can be re-invested in other bonds or bank certificates of deposit paying higher rates or perhaps in blue chip stocks with solid dividends.

What You Should Do

The first step you need to take is to find out what interest rate the bond is paying. That information is available from the broker who handled your father's account.

Secondly, you'll need to know the date when the bond can be redeemed. All issuers of put bonds assign this date, after which bondholders are allowed to redeem their bonds. In other words, you cannot simply "put" your bonds whenever you like. Again, your father's broker can provide these details.

If the bond's rate is higher than what you can readily obtain on similar investments, it makes more sense to keep the bond and continue to collect the interest payments.

On the other hand, if the rate is extremely low, speak with your financial adviser about selling and taking advantage of higher rates available elsewhere.

BUYandHOLD

Bonds can be bought and sold through BUYandHOLD associate firm, Freedom Investments. For details, call, the Customer Service Department at 800-944-4033.

Good luck!