We concluded the previous chapter with a hint that we would discuss Index funds next. Let us now discuss bonds. After all, debt funds and bonds share a lot in common.
Bonds are a fundamental part of the financial market and play a crucial role in raising capital for governments, municipalities, and corporations. They are considered fixed-income securities, as they represent loans made by investors to these entities. Bonds offer investors a predictable stream of income and are generally considered less risky than other investment options.
what are the 5 types of bonds?Types of Bonds:
There are various types of bonds available in the market, each catering to different needs and preferences. Here are some common types of bonds:
Understanding the features of a bond is essential for investors to make informed decisions.
Risks Associated with Bonds:
While bonds are generally considered less risky than stocks, they still carry certain risks. It is crucial for investors to understand these risks before investing in bonds. Here are some common risks associated with bonds:
Credit Risk: This refers to the risk of the bond issuer defaulting on its interest or principal payments. Bonds issued by entities with lower credit ratings generally offer higher yields to compensate investors for the additional