1. Bond Basics: Introduction
  2. Bond Basics: What Are Bonds?
  3. Bond Basics: Characteristics
  4. Bond Basics: Bond Prices and Yield to Maturity
  5. Bond Basics: Different Types Of Bonds
  6. Bond Basics: How To Read A Bond Table
  7. Bond Basics: How to Trade Bonds
  8. Bond Basics: Conclusion

Now you know the basics of bonds. Not too complicated, is it? Here is a recap of what we discussed:

  • Bonds are just like loans or IOUs. Buying a bond means you are lending out your money.
  • Bonds are also called fixed-income securities because the cash flow from them can be fixed.
  • Stocks are equity; bonds are debt.
  • The key reason to purchase bonds is to diversify your portfolio.
  • The issuers of bonds are usually governments and corporations.
  • A bond is characterized by its face value, coupon (interest) 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.
  • Municipal bonds, issued by local governments or agencies can earn tax-free interest for residents.
  • 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 and are issued by riskier issuers.
  • Other types of bonds include convertible bonds, callable, and putable bonds.
  • You can purchase most bonds through a brokerage or bank. If you are a U.S. citizen, you can buy government bonds through TreasuryDirect.
  • Often, brokers will not charge a commission to buy bonds but will mark up the price instead.

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