Bonds are generally considered an essential component of a diversified investment portfolio. They bring income to a portfolio, while typically carrying less risk than stocks. With the right approach, you can get as much yield as you would typically get from certificates of deposit (CDs) or savings accounts (and often more), though you may have to endure the fluctuation of bond prices and some additional risk to do so.
Here’s a look at how bonds work and the different types of bonds available. We’ll also go over some useful bond-buying strategies and discuss the pros and cons of investing in bonds.
What is a bond?
Bonds are an agreement between an investor and the bond issuer – a company, government or government agency – to pay the investor a certain amount of interest over a specified time frame. When the bond matures at the end of the period, the issuer repays the bond’s principal to the…
