Before diving deeper into why companies issue bonds and how investors can use them to their advantage, it is important to understand the key concepts behind bonds in general, such as:

• Prospectus - this is the document that describes the purpose of the issue and overviews the financial standing of the company based on the latest financial reports. The prospectus also describes the key features of the bond, such as its coupon rate, date of maturity, frequency of coupon payments, etc 
• Maturity - this is the date at which the issuing company must repay the principal amount of the bond to investors. Maturity is a fixed future date, which can be months, or decades, away from the issuing date
• Coupon rate - this is the interest rate payable to investors over the lifecycle of the bond. These payments are denoted as a percentage of the face value of the bond and are done at regular intervals, such as quarterly, biannually, or annually
• Face value - also known as the par value, is the amount of money the bondholder will receive when the bond reaches maturity. Face value is typically set at a fixed amount per bond
• Yield - yield is the rate of return investors can expect to earn from a bond over its lifecycle. It considers the price of the bond, coupon rate, and the time until maturity
• Credit rating - an important metric that is assigned by credit rating agencies to bonds based on the creditworthiness and overall financial position of the issuing company. Credit rating is an important factor in determining the risks associated with investing in a particular bond 
• Call feature - some bonds may be redeemed before maturity, which is convenient for investors when interest rates fall after the bond issue, but could be problematic if they have to reinvest at a lower rate

The world of corporate bonds is a diverse place, with offerings varying in maturity, par value, coupon, issuer, etc. Here are some common types of corporate bonds that are available for investment:

• Investment-grade bonds - these are the most popular types of corporate bonds, as they are typically issued by high-profile corporations with a healthy balance sheet and a profitable, stable business. Investment-grade corporate bonds are highly rated by credit agencies and typically range from AAA to BBB- 
• High-yield bonds - these are what investors colloquially like to call “junk bonds”, as they are often issued by companies that are in some financial distress and therefore offer a higher yield than most of the market. Investing in junk bonds can be risky and generally not advised for inexperienced investors. Junk bonds are typically rated below BBB- by credit agencies
• Convertible bonds - these fixed-income securities can be converted into shares of the issuing company at a predetermined price and offer additional capital appreciation alongside the typical coupon payments 
• Callable bonds - issuers can redeem callable bonds before the maturity date to take advantage of lower interest rates. Callable bonds typically have higher yields than non-callable ones, but could also be called away before the date of maturity
• Floating-rate bonds - while most corporate bonds may offer a fixed rate, some bonds adjust their interest rates based on a particular benchmark. A common benchmark used in corporate bonds is LIBOR. Floating-rate bonds offer protection against rising interest rates but also offer lower yields than fixed-rate bonds

After you have done thorough due diligence and created a shortlist of bonds you are interested in, it could be time to consider the different methods of bond investing you can use to make sure you’re choosing the best possible route. Ways to invest in corporate bonds include:

• Direct investment - any investor with a valid brokerage account has access to thousands of corporate bonds on the market. Each bond is assigned an ISIN code that investors can use to look up bonds. Each bond typically has a face value of $1,000, but this can also vary depending on the bond structure
• Bond funds - bond funds include mutual funds and ETFs that invest in a variety of bonds. Funds can be focused on bonds of comparable maturities and regions or could be diversified across a multitude of different fixed-income securities
• Bond indices - similar to bond funds, bond indices are a great way for investors to diversify their fixed-income portfolio by investing in indices that track a basket of corporate bonds
• Bond options - for investors who do not wish to own the underlying bond, bond options are a great alternative that allows them to gain exposure to corporate bonds and allows them to make short-term trades on the market
• Bond futures - similarly to bond options, bond futures are a popular way for investors to buy and sell bonds on a specified date and predetermined price 

"Simply put, investors should own less equities, more bonds, more global investments, more cash and more dry ammunition." - Mohamed El-Erian

Senior VS Subordinated Corporate Bonds

You may be wondering what happens to your money if the company that has issued bonds goes bankrupt. The answer to this question depends on the type of bond you have invested in. There are two types of bonds in terms of priority, namely senior and subordinated:

• Senior bonds are of a higher priority and are the first obligations paid off in the case of a bankruptcy and the restructuring that follows. Therefore, the interest rates of senior corporate bonds are lower, as they incur a less aggregate risk of default
• Subordinated bonds are of lesser priority and are paid after senior bonds in the case of a bankruptcy. This makes subordinated corporate bonds riskier and companies offer higher interest rates to account for the higher aggregate risk of default

Secured VS Unsecured Corporate Bonds

Another way of determining the safety of your investment in the face of a company default is by looking at the security status of the bonds you would like to invest in. Typically, there are two types of corporate bonds in terms of security - secured and unsecured:

• Secured bonds are backed by the real assets held on the balance sheet of the issuing company, such as land, equipment, machinery, real estate, cash, etc. if a company goes bankrupt, it will be forced to sell these assets to pay back the investors who have invested in their secured bonds
• Unsecured bonds, or debentures, are not backed by real assets and depend solely on the creditworthiness of the issuing company. If the company is able to consistently generate sufficient cash to cover their interest payments and has a sound-enough cash position to at least be able to refinance the principal amount by maturity - investors can consider their money to be in relatively safe hands and the risk of default to be fairly low 

• Corporate bonds are fixed-income securities that are popular among investors, thanks to their higher-than-average returns
• Credit ratings assign scores on corporate bonds based on the financial position of the issuing company and the risk of default 
• Corporate bonds are riskier than treasury bonds and offer higher coupon rates
• Investors can invest in corporate bonds in a number of ways, including direct purchases, bond funds, futures, options, and indices
• Senior bonds have higher payment priority and are the first obligations to be paid off in case of bankruptcy proceedings
• Secured corporate bonds are backed by real assets on the issuing company’s balance sheet, while unsecured bonds are dependent on the creditworthiness of the company