Adult IQ — Investing in Bonds

Understand Bonds • Know the Risks • Understand What You're Buying

Bonds don't usually get the same attention as stocks, but they are an important part of the investment world and something many people will come across through retirement accounts, investment portfolios or financial products.

The problem is that bonds can seem complicated when you first come across terms like yield, maturity, coupon, face value and interest-rate risk.

The Adult IQ Investing in Bonds guide is designed to make bonds easier to understand. It explains what a bond is, how it works, why governments and companies issue them and what you should understand before putting your money into one.

What You'll Learn

Inside this handbook, you'll learn about:

• What a bond actually is

• How bonds work

• Why governments and companies issue bonds

• How investors may earn a return from bonds

• Principal and face value

• Coupon payments

• Maturity dates

• Bond yields

• Interest rates

• Bond prices

• Credit quality

• The relationship between bond prices and interest rates

• Government bonds

• Municipal bonds

• Corporate bonds

• Treasury securities

• Other common fixed-income investments

• The difference between individual bonds and bond funds

• Interest-rate risk

• Credit and default risk

• Inflation risk

• Reinvestment risk

• Liquidity risk

• Duration and maturity

• Diversification

• What to look at when evaluating a bond or bond fund

• Questions to ask before investing

• Why higher potential returns can sometimes come with greater risk

What This Book Is Really About

A bond may sound simple — you lend money and receive payments in return — but there is more to understand before deciding whether a particular bond or bond fund is right for you.

Interest rates can affect bond prices. The financial strength of the issuer can matter. Inflation can affect the purchasing power of your returns, and some investments may be easier to sell than others.

This handbook isn't about telling you which bonds to buy.

It's about helping you understand what you're looking at so you can ask better questions and make more informed decisions about whether a particular investment fits your circumstances and goals.

Bonds Aren't All the Same

One of the important things to understand is that "bonds" doesn't describe just one type of investment.

Government bonds, municipal bonds, corporate bonds and other fixed-income investments can have different characteristics, risks, costs and potential returns.

There is also a difference between owning an individual bond and investing through a bond fund.

Understanding those differences can help you avoid treating every bond investment as though it works exactly the same way.

Build Your Adult IQ

You don't need to become a bond expert to understand the basics.

But if bonds are part of your investments, retirement plan or financial discussions, it makes sense to understand what they are, how they work and what risks are involved.

Adult IQ — Investing in Bonds gives you a practical foundation for understanding fixed-income investing, the terminology used around bonds and the factors worth considering before making an investment decision.

The goal isn't to tell you what to buy. It's to help you understand what you're buying.

Financial Disclaimer

This handbook provides general educational information about bonds and fixed-income investing. It is not financial, investment, tax, legal or accounting advice and does not provide personalized investment recommendations. Bonds and bond funds involve risks, including possible loss of principal, interest-rate risk, credit risk, inflation risk and liquidity risk. Consider your individual circumstances and consult a qualified financial professional where appropriate.