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

Long before there were corporations that issued shares of stock for investment, there was the systematic use of debt to raise money. Debt involves borrowing money with the promise to pay it back in full, along with interest over time. The guaranty assuring that promise is known as a bond. In other words, bonds represent debt obligations.

Bonds have been around for millennia. The ancient Mesopotomia city of Ur in what is today Iraq had a bond market around 2400 B.C., guaranteeing repayment for borrowed grain. Kings, and later democratic governments often borrowed by issuing bonds to fund wars and territorial expansion. In modern times, governments still borrow to undertake projects, but there is also a thriving market for bonds issued by corporations, who borrow for expanding profitable undertakings. For example, a company may borrow in order to acquire a competitor, to build a new factory, or to hire personnel.

Pacific Railroad Bond issued by the City and County of San Francisco in 1863

Bonds are fundamentally different from stocks in a number of ways. Shares of stock represent claims on profits and confer voting rights to shareholders and the price of stocks thus vary with expectations of future profitability for the firm. Bonds, on the other hand, represent debt repayment obligations and are priced based on factors such as the likelihood of being repaid.

In the modern economy, most diversified investment portfolios contain some allocation each to stocks and bonds, where bonds are often considered the more conservative choice of the two. For a number of reasons that will be discussed in this tutorial, bonds do offer some safeguards that shares of stock lack.

This tutorial will hopefully help you understand bonds, and to determine whether or not bonds are right for you. We'll introduce you to the fundamentals of what bonds are, the different types of bonds and their important characteristics, how they behave, how to purchase them, and more.


Bond Basics: What Are Bonds?
Related Articles
  1. Investing

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
  2. Investing

    U.S. Corporate Bonds: The Last Safe Place to Make Money

    There aren't many other sources right now for relatively safe, steady income.
  3. Investing

    Investing in Bonds: 5 Mistakes to Avoid in Today's Market

    Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
  4. Investing

    How Bonds Are Vital to a Successful Portfolio

    While bonds are a vital part of an investment portfolio, they are often ignored.
  5. Investing

    Six biggest bond risks

    Bonds can be a great tool to generate income, but investors need to be aware of the pitfalls and risks of holding corporate and/or government securities.
  6. Investing

    An Introduction To Corporate Bond ETFs

    Learn about the pros and cons of these specialized ETFs, and get in on the opportunities they can provide.
  7. Investing

    Find the Right Bond at the Right Time

    Learn about the types of bonds you should consider investing in, when you should be buying them and how to compare yields against their time to maturity.
  8. Investing

    6 Ways That Investors Use Bonds

    Learn how the stodgy stereotype of bonds can overshadow the basic and advanced uses of what these investments can do for your portfolio.
Trading Center