Are Worthy Bonds a Good Investment for You?

Worthy Bonds represent an investment platform providing access to asset-backed bonds for the public. They offer an alternative approach to generating returns compared to traditional savings vehicles.

What Worthy Bonds Are

Worthy Bonds are a type of fixed-income security, offering a set return over a period. They are asset-backed, with proceeds funding short-term loans for small businesses. These loans are typically secured by inventory, real estate, or other tangible assets.

When an individual invests in a Worthy Bond, they provide capital to Worthy, which lends it to American businesses. These businesses repay their loans with interest, which is then used to pay bondholders. Each Worthy Bond is issued in $10 denominations, making them accessible to a wide range of investors. Current Worthy Bonds have no fixed maturity date, offering flexibility.

Key Investment Features of Worthy Bonds

Worthy Bonds offer a fixed interest rate, currently 7.0% APY, with interest compounding daily. This rate is consistent for all bondholders and not subject to market fluctuations. Interest payments can be reinvested to compound earnings.

Worthy Bonds offer high liquidity, allowing investors to redeem them at any time without fees. Funds are generally deposited within four to six business days. Worthy Bonds are qualified by the U.S. Securities and Exchange Commission (SEC) under Regulation A+, requiring public financial filings. SEC qualification does not imply endorsement.

The asset-backed nature of Worthy Bonds provides security. Loans to small businesses are secured by collateral, such as inventory or real estate, with Worthy typically lending less than the pledged asset’s value. This structure aims to protect bondholders.

Interest earned on Worthy Bonds is considered ordinary income for U.S. federal and state tax purposes. Worthy issues a Form 1099-INT for interest exceeding $10, which must be reported on tax returns.

Comparing Worthy Bonds to Other Investment Types

Worthy Bonds can be compared to other common investment vehicles. Unlike traditional savings accounts or Certificates of Deposit (CDs), Worthy Bonds typically offer a significantly higher interest rate. However, Worthy Bonds are not insured by the Federal Deposit Insurance Corporation (FDIC), which means the principal is not guaranteed by the U.S. government as it would be in a bank account.

Compared to traditional corporate or government bonds, Worthy Bonds differ in their issuance and market liquidity. Corporate and government bonds are often traded on public exchanges, while Worthy Bonds are privately offered and redeemed directly through the platform. Traditional corporate bonds are often rated by credit agencies, a feature not typically applied to Worthy Bonds. Their underlying collateral, primarily small business assets or real estate, also distinguishes them from the broader assets or government backing of other bond types.

Worthy Bonds share some similarities with peer-to-peer lending platforms, as both involve direct lending models. However, Worthy structures its investments as asset-backed bonds, providing a more formalized security framework compared to some unsecured peer-to-peer loans. In contrast to the stock market, Worthy Bonds offer a fixed-income stream and are not directly correlated with stock market volatility. The stock market offers potential for capital appreciation, which is not the primary objective of a fixed-income product like Worthy Bonds.

Evaluating Worthy Bonds for Your Portfolio

Integrating Worthy Bonds into a personal financial strategy requires consideration of individual financial goals. For those seeking consistent income generation or diversification within a fixed-income allocation, Worthy Bonds may align with these objectives due to their regular interest payments. As an alternative fixed-income asset, Worthy Bonds can contribute to portfolio diversification, as their performance is not tied to the volatility of public stock markets.

Conducting due diligence is an important step before investing. Individuals can review Worthy’s SEC filings, such as their Form 1-A and offering circular, to gain a deeper understanding of their operations, financial health, and the specific terms of the bond offerings. This information provides transparency regarding the company’s structure and its use of investor funds.

The decision to invest should be based on an individual’s personal financial situation, including their overall asset allocation and capacity to understand the investment. Non-accredited investors, for example, are subject to limits on how much they can invest, generally capped at 10% of their annual income or net worth. Evaluating Worthy Bonds in the context of one’s complete financial picture helps ensure alignment with personal risk tolerance and long-term financial objectives.