What happens when you buy a bond?

When you purchase a bond, you essentially lend money to the issuer in exchange for periodic interest payments and the return of the bond’s face value upon maturity. Bonds are a fundamental component of the financial markets, offering a way for entities to raise capital while providing investors with a relatively stable investment option.

Should you invest in bonds?

One key tip for buying bonds is to diversify your portfolio. As with other investments, spreading your bond investments across different issuers, sectors and maturities can help reduce risk. By diversifying, you protect your portfolio from the impact of any single issuer defaulting or a specific market downturn.

Where can I buy bonds?

You can buy bonds from the bond market via a broker, through an ETF or directly from the U.S. government. Corporate, government, municipal, and zero-coupon bonds are four important types of bonds.