What's a bond?
- What's a bond?
- How much money can I make on a bond?
- How do bond returns compare with stock returns?
- What are the advantages of bonds for retirement?
- What are the risks in bonds?
- What are TIPs?
- Which bonds are good for a retirement portfolio?
- How should I buy bonds?
- Should I buy short-term or long-term bonds?
- How much of my portfolio should be in bonds?
- How are bonds taxed?
Essentially, a bond is a fancy IOU. Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects. When you buy a bond, you are loaning your money to the issuer - be it General Electric or Uncle Sam - for a certain period of time.
In return, you get interest on the loan, and you get the entire loan amount paid back either on a specific date (known as the bond's maturity date) or at a future date of the issuer's choice. The length of time to maturity is called the bond's term.
Bond investors have a language all their own. A bond's value when it's issued is known as its "par value," and its interest payment is known as its "coupon." For example, a $1,000 bond paying 7% a year has a $70 coupon. Expressed another way, its "coupon rate" is 7%.
