Bonds – The Ultimate Guide
Bonds – The Ultimate Guide: What Is A Bond, How Bonds Work, And Why They’re In The News So Much!
November 15, 2021
Have you noticed that bonds are all the rage all of a sudden? Sure, when it comes to stocks, all the hoopla makes sense. They’re all over the place from one minute to the next! But bonds are the slow-moving cousin of stocks. So why all this interest?
Well, bonds are pretty fascinating once you start to understand them and today you’ll learn just how deep the bonds rabbit hole goes.
We’ll learn what bonds are, how to invest in bonds, types of bonds including savings bonds, why and when you might want to invest in bonds, and how well do bonds perform.
What is a bond?
Bonds are called “fixed income instruments” but that’s economics jargon. In real-people terms bonds are loans given to other people, but unlike a loan you would give a friend, bonds are nicely packaged up so that they can be traded around easily.
They have well spelled-out terms, like payback dates, payback value, terms in case the borrower goes bankrupt and interest payments.
Since they are nicely packaged and well spelled out, these bonds can be traded to bond experts or even traded around on the stock market by the click of a button.
Also unlike a loan you might give to a friend, these loans are usually given out by huge companies or governments who are willing to go through the effort of making them. Then since these entities are very large the loans are usually quite a bit safer than one you might give to a friend.
Bond Definition
A bond is a chunk of debt issued by a company or government to individual investors. Bonds return the full principal and a fixed interest amount called a coupon to the investor at the end of the bond’s maturity, or as regular payouts called dividends.
How to invest in bonds?
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