Investing in Bonds Cheat Sheet

Overview

Bonds are fixed-income securities that provide stable returns and lower risk compared to stocks. They are ideal for portfolio diversification and long-term financial security.

Types of Bonds

• Government Bonds: Issued by governments; considered low-risk.
• Municipal Bonds: Issued by local governments; often tax-exempt.
• Corporate Bonds: Issued by companies; offer higher yields but may carry more risk.
• Treasury Bonds (T-Bonds): Long-term U.S. government debt with fixed interest.
• High-Yield (Junk) Bonds: Higher return potential but increased risk.

Key Bond Metrics

• Coupon Rate: Interest paid to bondholders.
• Yield to Maturity (YTM): Total return if held until maturity.
• Credit Rating: Assessment of issuer's financial stability.
• Duration: Measures sensitivity to interest rate changes.

Benefits of Investing in Bonds

• Provides steady income through interest payments.
• Lowers overall portfolio risk with diversification.
• Predictable returns for long-term financial planning.

Risks & Considerations

• Interest Rate Risk: Bond values decline as rates rise.
• Inflation Risk: Fixed payments may lose purchasing power over time.
• Credit Risk: Issuers may default on payments.

Tools & Resources

• Bond yield calculators for return estimation.
• Investment platforms offering bond portfolios.
• Financial advisors for tailored fixed-income strategies.