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Tuesday, May 24, 2005
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NASD Unveils Online "Smart Bond" Learning Center Aimed at Growing Number of Retail Investors in Bond Markets

Washington, DC — Retail investors are now responsible for nearly two of every three corporate bond transactions. But surveys show that retail investors are not very knowledgeable about how bonds, and bond markets, work.

 

To help close that knowledge gap, NASD today launched Smart Bond Investing, an online learning center that provides a wealth of information about bonds and bond investing, along with easy access to real-time corporate and municipal bond prices and the day's most active corporate bonds. In addition to covering the basics of bond maturity, yield and pricing, Smart Bond Investing offers sections on dealing with risk; how bonds are bought and sold; an overview of the corporate, municipal and government bond markets, and a look at the various types of individual bonds and bond mutual funds.

 

"Bond markets, especially the corporate bond market, have been mostly a mystery to individual retail investors, who are increasingly important to those markets, and who find those markets increasingly important to them," said John Gannon, NASD's Vice President for Investor Education. "Individual investors who suffered major losses when the stock market fell have moved more of their money into the bond markets. And baby boomers are moving more and more of their assets from equities to bonds as they get closer to retirement. There's no doubt that retail investors need to be armed with more information and better education about bonds and bond investing.

 

"Bond investing is an important diversification strategy and can be used to accomplish a variety of investment objectives," Gannon said. "But investors should recognize that like all investments, bonds and bond mutual funds carry risk. Smart Bond Investing untangles the complexities by offering concise information about bonds and bond funds as well as tips and strategies for investing."

 

An NASD survey revealed that almost 40 percent of investors own bonds or bond funds. But the same survey showed that individual investors know little about how the bond markets work. For example, the survey indicated that only 40 percent of investors understand that bond prices fall as interest rates rise. Another 34 percent either thought there is no fee for buying or selling a bond, or they did not know whether they were paying a fee for bond transactions.

 

Special features of Smart Bond Investing include a Risk Report Card and Snapshot for corporate, municipal, government and additional types of bonds, an interactive Accrued Interest Calculator; helpful tips and resources, including a Bond and Bond Fund Comparison table and a Top 10 List of things to consider before investing in bonds or bond funds.

 

Individual investors now have access to real-time corporate bond transaction data, along with aggregate end-of-day highlights (most active bonds, total volume, advances and declines, new highs and lows) free of charge on NASD's Web site at www.nasdbondinfo.com. NASD disseminates real-time transaction and price data on the entire universe of more than 29,000 corporate bonds through TRACE - the Trade Reporting and Compliance Engine. Smart Bond Investing includes a brief tutorial on using http://www.nasdbondinfo.com/.

 

The New York Times now publishes daily corporate bond market highlights derived from NASD's TRACE data in its financial pages.

 

Smart Bond Investing is the third in NASD's Smart Investing series. The Smart Investing series offers comprehensive information plainly, simply, and without bias to help investors reach their goals.  The first in the series — Smart Saving for College — helps families better understand 529 plans and other college savings options, the second — Smart 401(k) Investing — helps investors understand investing in 401(k) plans. 

 

Smart Bond Investing is available on NASD's website at http://www.finra.org/smartbonds/.

 

NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD offers a broad range of tools and programs to help people better understand investing and know how to protect themselves along the way — including developing and publishing Investor Alerts, brochures and online resource guides on such critical topics as mutual fund class shares and 401(k) and college savings plans. NASD has distributed this information through its Web site, printed materials and Investor Forums.

 

NASD touches virtually every aspect of the securities business — from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our website at www.nasd.com.