Bond & Fixed Income Basics for Beginners

There is a hidden cost that new bond investors face that many don't even know exists. It comes from the spread that brokers charge clients who buy bonds and, in some cases, can be several percentage points or many thousands of dollars.

Have you ever asked yourself, what is a bond coupon? This term is from more than a century ago when bonds actually came as physical engraved certificates. Although it's not used any more, but the origin of the term bond coupon is interesting. Take a few seconds to learn.

Burton Malkiel, famed author of A Random Walk Down Wall Street and respected Ivy League educator has said that a good rule of thumb for investors to use in order to determine the percentage of their assets that should be invested in bonds is to simply look at their birth certificate. A 30 year old? 30% bond allocation. A 60 year old? 60% bond allocation.

It is possible to use the risk premium - that is, the spread between long term bond yields and earnings yields - to guage the relative value of the stock market. This risk premium is important because long term bond yields on United States Treasury bonds is considered the risk-free interest rate.

Governments issue them. Companies issue them. People buy them. Learn more about bonds and why they are really just an "IOU".

Want to learn about bonds and fixed income investing but don't know where to start? If so, then this is definitely for you. I wrote this bonds 101 article after first taking over the site, and it has been tremendously successful.

Bond duration is one of the single most important metrics that any investor with a fixed income portfolio should know and live by at all times. If you build a collection of bonds that have too long a duration, you could experience losses as severe as the stock market.

For the serious investor who is interested in adding fixed income holdings to their portfolio.

Discussion boards, Real Time Quotes, and lessons from "The Bond Professor" make this one of the best sites for people looking into fixed income investing for the first time.

Includes information and a great paper entitled "An Investor's Guide to Bond Basics".

Making money from investing in bonds comes down to earning a profit from two sources: interest income and capital gains. Almost all bond investing strategies depend upon some combination of these two types of income.

A bond ladder is a technique used by those who invest in bonds to avoid reinvestment risk. This helps avoid shocks from changes in interest rate and keep a relatively predictable stream of income flowing into your bank account from interest income.

The bond market works very differently than the stock market. With less liquidity and bigger spreads, investing in bonds presents its own challenges that new investors should understand before committing their money.