Bonds are a key component of a balanced portfolio. They offer stability and regular income, making them ideal for conservative investors.
What is a Bond?
A bond is a loan you make to a government or corporation. They pay you regular interest and return your principal at maturity.
Types of Bonds
- Treasury Bonds: Issued by US government, very safe
- Corporate Bonds: Issued by companies, higher yield, higher risk
- Municipal Bonds: Issued by state/local governments, tax-free
- Agency Bonds: Issued by government agencies
Bond Risks
- Interest Rate Risk: Rates up, bond prices down
- Default Risk: Issuer may not pay
- Inflation Risk: Returns may not keep up with inflation
How to Invest in Bonds
- Buy individual bonds
- Bond funds and ETFs
- TreasuryDirect (for government bonds)