Bonds & Fixed Income

How bonds work, yields, credit and rate risk.

1. How Bonds Work — A bond is a loan you make to a government or company. In return you get regular interest and your money back at the end. Here are the parts of a bond, how you earn from it and why bonds belong in many portfolios.
2. Why Prices and Yields Move Opposite — When interest rates rise, existing bonds fall in price, and when rates fall, they rise. It is the single most important idea in bond investing. Here is why it happens, with real numbers.
3. Treasuries, Corporates & Munis — Bonds come from three main kinds of issuers: the U.S. government, companies and states or cities. Each offers a different mix of safety, yield and tax treatment. Here is how they compare.
4. Credit Ratings and Default Risk — The biggest risk in a bond, besides interest rates, is that the borrower does not pay you back. Credit ratings summarize that risk. Here is how the scale works and how yields rise with risk.
5. Duration and Rate Risk — Duration tells you how much a bond’s price will move when interest rates change. Longer bonds swing far more than short ones. Here is the rule of thumb and how 2022 put it to the test.
6. Bond Funds and ETFs — Most individual investors own bonds through funds rather than buying single bonds. Funds offer instant diversification and easy trading, but they behave differently from individual bonds. Here is what to know.