Understanding Bonds

Radio Transcript, 60 seconds, for use during week of October 22.

This is an Invest Wisely minute brought to you by Iowa State University Extension.

Investing in bonds can help you diversify your portfolio. You are a lender. You loan your money to a government entity, corporation, or a financial institution and receive regular interest -- either semi-annually, annually, or when you redeem the bond. 

Risk with bonds can be minimized.  For example, don’t buy bonds with long maturities when interest rates are low.  Stick to short-term bonds that mature in 3 years or less or intermediate-term bonds that mature in 3 to 20 years. Purchase bonds with different maturity dates.

Other tips for reducing risk -- Diversity across different bond issuers. And check the credit worthiness of the bond issuer.

Invest Wisely comes from Iowa State University Extension through a grant from the Investor Protection Trust providing investor education on the web at investorprotection.org.