Do Bonds Have Shares or Units?

The face value of a bond is the amount a bond investment will pay you when it matures. The face value is also the amount of a bond you own. A bond investment could have a face value of $5,000, $50,000 or $5 million and it is a single bond from the point of view of the investor and the market. The units of bonds are, in the strictest sense, a dollar. Although there are exceptions, investments are usually made in face value increments of $1,000 or $5,000.

The current value or cost of a bond can and probably is different from the face value. Bond prices are quoted as a percentage of the face amount. For example, a bond is quoted at 95.634. At this price, a $10,000 face value bond would cost $9,563.40 and a $50,000 bond would be $47,817. Bonds can also carry premium prices such as 102.773, putting the value of a $10,000 bond at $10,277.30.

Packaged and managed bond investment products can have shares or units. Investing in a bond mutual fund, bond exchange-traded fund or bond closed-end fund involves buying shares of the fund. The shares are proportional ownership of a portfolio of bonds. Unit investment trusts are another, similar type of packaged bond investment that uses units as the investment unit. If your bond investment statement lists the number of shares or units you own, you are invested in a bond fund or bond UIT.

Another type of fixed-income investment that comes in shares is preferred stock. Preferred stock can be described as a hybrid between bonds and stocks. Investors who buy corporate bonds for the income also may take a look at the preferred shares a company has outstanding. Just as a bond pays a fixed rate of interest, preferred shares pay a fixed dividend. From an investment return outlook, preferred share returns will be more like bond returns than like common stock results.