Find Safety In Bonds?

Bonds are essentially a way for an institution to raise money. When you buy a bond, you’re getting a guaranteed rate of return for a fixed period of time, making them a less risky alternative to volatile stocks. On the other hand, bonds usually yield a smaller return on the investment than a stock would over the long term.

There are three types of bonds: corporate, issued by companies; municipal, issued by local governments; and Treasuries, issued by the federal government. Munis and T-bonds usually have the lowest return because the stability of a government is a pretty safe bet. Some corporate bonds offer higher returns but it comes with higher risk, as any company can go out of business. But if a company does go under, its bondholders get paid before its stockholders, if they get anything at all.

If you want to invest now but think this volatile stock market will make you seasick, bonds are an option, but you should consider your age and your priorities. If you’re within a year of retirement or already retired, putting money in bonds is a good form of security. But if you’re more than five years away, consider standing strong with a smaller portion of your portfolio in bonds and cash. You certainly don’t want to lose out on potential market upswings.

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