A bond is essentially a loan: you lend money to a government or company, and they pay you interest and return the principal at maturity. Bonds are generally steadier than stocks, which is why they're used to reduce a portfolio's overall risk. This is educational information, not advice.
Bonds Explained
The steady, income-paying counterweight to stocks.
No sign-upNo lender referralsNo spamNo data sharingNo credit check
Advertisement
Interest-rate risk
Bond prices move opposite to interest rates: when rates rise, existing bonds paying lower rates become less valuable, and vice versa. Longer-term bonds are more sensitive to rate changes than short-term ones. A total-bond-market fund (like BND) spreads this risk across many bonds and maturities.
Their role in a portfolio
Bonds cushion the ride when stocks fall and provide income. Younger investors often hold few bonds for growth; those nearing or in retirement usually hold more for stability. Your right amount depends on your time horizon and risk tolerance.
Educational information only — not investment advice, and not a recommendation to buy any security. Expense ratios are approximate and can change; verify with the fund issuer. We are not a licensed financial advisor.
Frequently asked questions
Are bonds risk-free?
No — they carry interest-rate risk and, for corporate/municipal bonds, some credit risk. But high-quality bonds are generally far steadier than stocks.
Should I own bonds?
Most diversified portfolios include some bonds for stability, scaled to your time horizon. This is educational information, not advice.
More investing guides
Best Low-Cost Index ETFs for Long-Term InvestorsThe Three-Fund PortfolioVTI vs VOOHow to Start InvestingIndex Funds vs ETFsDollar-Cost AveragingRoth IRA vs 401(k)Target-Date FundsEmergency FundCompound Interest ExplainedHigh-Yield Savings AccountsAsset AllocationDividend InvestingHealth Savings Account (HSA)529 College Savings PlansThe 4% Rule (Safe Withdrawal Rate)Roth Conversions ExplainedI Bonds (Series I Savings Bonds)Net Worth: Your Financial Scorecard