When most people think about investing, they think about stocks. But bonds play a big role too, especially when it comes to building a balanced portfolio. Bonds are often seen as the safer, steadier part of investing, and they help reduce risk.
A bond is basically a loan you give to a company or government. In return, they agree to pay you interest regularly and then give back your money at the end of a set period. Because of this structure, bonds are considered more predictable than stocks. You usually know how much you’ll earn and when you’ll get paid.
Adding bonds to your portfolio can help smooth out the ride. When stocks are doing badly, bonds often hold up better. This helps protect your investments during market downturns. The older you get, the more you might rely on bonds to keep your money safe and provide steady income.
There are many types of bonds—government bonds, municipal bonds, and corporate bonds. Each has its own level of risk and reward. Learning how they work and mixing them wisely into your portfolio is a smart move for any investor.
Let me know when you’re ready for the next batch starting with Lesson 56: Understanding Inflation’s Impact on Investing.
