Author - David John Marotta

Bond Basics

Bond Basics

Bonds are boring, but smart investors use them for stability, diversification, and upcoming withdrawals. Understanding some basics will help you evaluate the risks and rewards of owning bonds in your portfolio.

What is a Bond?

A bond is essentially an “I.O.U.” You become a bondholder when you lend money to the government, a corporation, or a municipality. In exchange for your money, the bond issuer promises to pay interest periodically and repay principal equal to the bond’s face value at the end of a specific time period.

Consider a company that needs to build a new facility costing $2 million. …

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