Bonds and Debt Instruments

Bonds and bond funds can be extremely helpful to anyone concerned about capital preservation and income generation. They also can help partially offset the risk that comes with equity investing. Bonds and bond funds hold opportunity—but they also carry risk.

FINRA Market Data

This website contains real-time transaction information on investment grade, non-investment grade and convertible corporate bonds. Also use the site to check FINRA-Bloomberg Bond Indices.

 

Bond Funds

Before you invest in a bond fund, it is important that you understand the different fund types and how bond funds differ from individual bonds. For instance, one common misconception about bond mutual funds is that there is no risk to principal. This is not the case: Your initial and subsequent investments will fluctuate—and indeed may decline—just as they do if invested in a stock mutual fund.

 

Interest Rate Risk

Remember the cardinal rule of bonds: When interest rates fall, bond prices rise, and when interest rates rise, bond prices fall. Interest rate risk is the risk that changes in interest rates in the U.S. or the world may reduce (or increase) the market value of a bond you hold. Interest rate risk—also referred to as market risk—increases the longer you hold a bond.

Smart Bond Investing

You've heard it before: Asset allocation is the foundation of prudent investing. You've probably heard this before, too—your portfolio should contain a mixture of stocks and bonds. This is sound advice. But do you understand the critical characteristics of bonds? This comprehensive guide provides a wealth of information about investing in bonds and bond funds.

Before You Invest

Here are 10 things to consider before you invest in bonds or bond funds.

U.S. Savings Bonds

Savings bonds are issued by the federal government and may be purchased for an investment as low as $25.

Promissory Notes Can Be Less Than Promised

A promissory note is a form of debt that companies sometimes use, like loans, to raise money. While promissory notes can be legitimate investments, some promissory notes sold widely to individual investors are not.

Accrued Interest Calculator

Interest on a bond accrues between regularly scheduled payments. To find out how much interest is owed on a given bond, use our Accrued Interest Calculator. Select the appropriate bond type to figure accrued interest for corporate and municipal bonds or government bonds. Interest for corporate and municipal bonds is calculated using a 360-day year. Interest for government bonds is calculated using a 365-day year.