Now you know the basics of bonds. Not too complicated, is it? Here is a recap of what we discussed:
- Bonds are just like IOUs. Buying a bond means you are lending out your money.
- Bonds are also called fixed-income securities because the cash flow from them is fixed.
- Stocks are equity; bonds are debt.
- The key reason to purchase bonds is to diversify your portfolio.
- The issuers of bonds are governments and corporations.
- A bond is characterized by its face value, coupon rate, maturity and issuer.
- Yield is the rate of return you get on a bond.
- When price goes up, yield goes down, and vice versa.
- When interest rates rise, the price of bonds in the market falls, and vice versa.
- Bills, notes and bonds are all fixed-income securities classified by maturity.
- Government bonds are the safest bonds, followed by municipal bonds, and then corporate bonds.
- Bonds are not risk free. It's always possible - especially in the case of corporate bonds - for the borrower to default on the debt payments.
- High-risk/high-yield bonds are known as junk bonds.
- You can purchase most bonds through a brokerage or bank. If you are a
citizen, you can buy government bonds through TreasuryDirect. U.S.
- Often, brokers will not charge a commission to buy bonds but will mark up the price instead.
Personal FinanceBond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
Financial AdvisorMost of us have borrowed money at some point in our lives, and just as people need money, so do companies and governments. Companies need funds to expand into new markets, while governments need ...
RetirementYes, retirees should invest in bonds, but remember that not all bonds are safe investments. Seek the help of a financial advisor.
Managing WealthFind out which bonds you should be investing in and when you should be buying them.
TradingWe break down the stodgy stereotype to see what these investments can do for you.
ETFs & Mutual FundsWhat bonds are: Debt securities where you lend money to an issuer (e.g., a corporation or government) in exchange for interest payments and the future repayment of the bond’s face value. ...
ETFs & Mutual FundsMunicipal bonds and bond funds differ in several ways, which is partly why they complement each other well.
MarketsLearn about various ways that you can adjust a fixed income investment portfolio to mitigate the potential negative effect of rising interest rates.
ETFs & Mutual FundsBonds can be a great addition to a portfolio but be aware of these four myths.
Managing WealthLearn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.