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What are Bonds?

Posted by Ky Spector on

Bonds may seem complex, but that's because the financial sector wants you to believe that.

In reality, they're quite simple.

Bonds are just loans to a government, company, or another type of entity.

Here is you're intro to Bond 1101 lesson:

  • Municipal Bond
    • Loan to a city, state, or county
  • Treasury Bond
    • Loan to the federal government
  • Corporate Bond
  • High-Yield or Junk Bond
    • Loans to less dependable, higher risk companies.

Congrats! You now understand Bonds!

Of course, how much you earn on these Bonds will the depend on how high the risk is.

What I mean is... If you buy a Treasury Bond from the US, you will earn very little because the odds are they will be able to pay you back, versus you buying one from Venezuela which is a huge risk.

Just like stocks. They higher the risk the higher the reward.

 

Finance

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