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Moms Share Tips for Green Parenting

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Moms Share Tips for Green Parenting

Moms Share Tips for Green Parenting

Moms Share Tips for Green Parenting

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  • <iframe src="https://www.npr.org/player/embed/90621723/90621717" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Regular Mocha Moms Jolene Ivey and Asra Nomani talk about ways to make your family more eco-friendly. They are joined by Beth Murray, the founder of the Family Footprint environmental group.

Michel Martin, host:

I'm Michel Martin, and this is Tell Me More from NPR News. Still to come, we kick off our series on things not to say in a diverse workplace. Today, things not to say to Asian-American co-workers. But first, we're going to continue our series on investing 101. We're going over the basics. Now, we envision this as being of particular interest to our newly minted grads, but if you can use a primer or a refresher course this is for you, too. Last week, our personal finance guru, Alvin Hall, told us the basics about stocks. Today he's going to talk about bonds. What are they and do we want some? Alvin Hall is with us. Welcome back.

ALVIN HALL: Thank you.

MARTIN: So, what are they, Alvin? What are bonds?

HALL: Bonds are fixed-income securities, that's another name for them, but essentially they are IOUs. Corporations, municipalities and the U.S. government issues bonds to people with the promise that we will make semiannual interest payments on time and then, at maturity, you'll get your money back. So, bonds are really a fixed-income stream that companies are willing to pay you in order to borrow money from you.

MARTIN: So, when you buy a bond you're basically lending money to a government, a company.

HALL: Or a municipality.

MARTIN: A municipality.

HALL: Exactly. And they agree to pay you interest on a fixed date at regular intervals until that bond matures.

MARTIN: How can you figure out - well, first of all, why would you want some?

HALL: Well, you want bonds because they really help balance out the volatility of stocks and they also respond to different things in the economy. If you look at equities or stocks, they really move up and down according to the forces of supply and demand, a company's earnings, how well a company is doing, rumors about a company in the marketplace, whereas bond prices really are influenced by changes in interest rates. As interest rates go up, bond prices go down. As interest rates go down, bond prices go up. So, you have a different factor there. So, it helps offset some of the risk associated with stocks.

MARTIN: How do you make money from bonds?

HALL: You make money first on the interest payments. This is what makes them so attractive to many people. You know that every six months you're going to get that interest payment, provided you bought a high-quality bond. And the other way you make money is through capital gains. If, as we've seen recently, interest rates go down, then older bonds outstanding in the market rise in price. So, therefore, you make capital gains on the bonds. So, two ways: interest streams and capital gains are the way you make money.

MARTIN: You talked about quality bonds. How do you decide whether a bond is of quality and whether you want one?

HALL: Excellent question. You decide by checking out the bond's ratings. Since the mid '70s, when New York City almost went bankrupt, it is virtually impossible to issue a bond in America that is unrated by either Moody's or Standard & Poor's. And the first four ratings - which are AAA, AA, A and BBB - are considered to be investment-grade ratings. So, you go to Standard & Poor's, you look at how they've rated the bonds, and you buy the bond that is most appropriate to your risk tolerance. Know that the higher the bond rating, the lower the interest payments that you will receive from that bond.

MARTIN: How do you buy a bond? Do you buy them through stock brokers or, we talked last week about mutual funds that you can, basically, just go online and find. How does - does it work the same way with bonds? I know people are familiar with savings bonds, like, you know, this is a custom a lot of people have when a baby is born in the family, they go to the bank and get a savings bond. But that's not what you're talking about here.

HALL: No. A savings bond is really a savings vehicle. You put your money in and in that particular case you can't trade that, you can only redeem a savings bond at the financial institution from which you've bought it. In this case, we're looking at bonds that are actually classified as securities, and you buy them exactly the same way you do equities. You can go to your stock broker and you say, I want to save money on my taxes so therefore, you can put money in municipal bonds or buy municipal bonds. If you're looking for absolute safety then you'd look at government bonds. If you're willing to take a little bit more risk for a higher return, you can look at corporate bonds. So, you can go to your broker and buy these. The other way is to look at bond mutual funds that focus on municipals, U.S. government or corporate bonds. But when you're looking at a bond mutual fund, there are two things I want people to take into account. One, the length of maturity that the mutual fund focuses on, for example, if they focus on long-term maturities right now, that might not be a good thing because you are locking yourself into a low- yielding interest period for a longer period of time. So, look at that, and look at the quality of bonds that they invest in. If you see the word "junk bonds" associated with the mutual fund, I suggest that you take a deep breath and evaluate your risk tolerance before you put your money into it.

(Soundbite of laughter)

MICHEL MARTIN, host:

Junk means junk for a reason, right?

Mr. HALL: Oh, yes.

MARTIN: OK.

(Soundbite of laughter)

Mr. HALL: I remember working for a company and they said to me, oh, you shouldn't use that word junk, Alva, we call them high-yield bonds.

MARTIN: OK.

Mr. HALL: Because that's more marketing friendly.

MARTIN: Oh, OK. What do you want to talk about next week, very quickly?

Mr. HALL: Next week we're going to talk about how to structure a portfolio between bonds and stocks so you get the best return.

MARTIN: Oh, right. That sounds, well, not very interesting, but important.

(Soundbite of laughter)

Mr. HALL: I'll make it interesting. I'll work hard to make it interesting and exciting for us.

(Soundbite of laughter)

MARTIN: We appreciate that.

Mr. HALL: I enjoy doing this. Thank you.

MARTIN: Our financial Management guru, Alvin Hall, joined us from our New York bureau, as always. Thank you for the good advice, castor oil but with a spoonful of sugar.

(Soundbite of laughter)

Mr. HALL: You're welcome.

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