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.

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

    Why Bond Prices Fall When Interest Rates Rise

    Never invest in something you don’t understand. Bonds are no exception.
  3. Investing

    How Interest Rates Impact Bond Values

    The relationship between interest rates and bond prices can seem complicated. Here's how it works.
  4. Investing

    Corporate Bonds: Advantages and Disadvantages

    Corporate bonds can provide compelling returns, even in low-yield environments. But they are not without risk.
  5. Investing

    Find The Right Bond At The Right Time

    Find out which bonds you should be investing in and when you should be buying them.
  6. Retirement

    How to Pick the Right Bonds For Your IRA

    Learn about the best types of bonds to include in an IRA depending on an investor's risk tolerance. Understand the tax benefits of holding bonds in an IRA.
  7. Investing

    Bond Funds Boost Income, Reduce Risk

    Bond funds can provide stable returns for those who depend on their investment income.
Frequently Asked Questions
  1. Which Schools Did Warren Buffett Attend?

    Warren Buffett attended multiple prestigious schools on his path to success, but he places much more significance on real-world ...
  2. What are some examples of expansionary monetary policy?

    Learn about expansionary monetary policy and how central banks use discount rates, reserve ratios and purchases of securities ...
  3. What is the role of the nation-state in globalization?

    Learn about the evolving role of the nation-state in an increasingly globalized world as fewer boundaries restrict international ...
  4. What are some examples of positive correlation in economics?

    Learn the most common examples of positive correlation in macroeconomics and microeconomics, including demand and price, ...
Trading Center