The booklets from the Editors of Kiplinger’s Personal Finance magazine, the Investor Protection Trust and the American Library Association is now available. Free download, pdf format.

• What is a bond?
• How bonds work
• Types of bonds and their relative safety
• Why bonds can be an important part of your investment portfolio
• Yield and how it relates to bond prices
• Bond ratings and how they can help you reduce risk

A bond is basically a loan made by a corporation or government with the money used for a specific project such as a plant upgrade or a new bridge. The issuer pays the bondholder a specified amount of interest for a specified time, usually several years, and then repays the bondholder the face amount of the bond.

Bonds may belong in your investment plan for good reasons:

• Economic forces that depress stock prices—the early stages of a recession, for instance—tend to boost bond prices. (The opposite also tends to hold true: When the stock market rises, often due in part to falling interest rates, bond prices often fall.)
• Bonds can generate impressive profits from capital gains. Sometimes you can even calculate those gains years in advance on the day you buy the bonds.
• Bonds can provide a predictable stream of relatively high income you can use for living expenses or for funding other parts of your investment plan.

Some kinds of bonds offer valuable tax advantages and unparalleled opportunities to take advantage of the time value of money, that is, to invest a modest amount with a reasonable prospect of collecting a large amount a few years later.

Note that the word “safety” doesn’t appear in this list. A lot of people think bonds are about the safest investment around, but as you’ll see, such a notion may not always be correct.

Download A Premier for Investing in Bonds

Pdf format, 176kb, 12pages.

The Investor Protection Trust (IPT) is a nonprofit organization devoted to investor education. Over half of all Americans are now invested in the securities markets, making investor education and protection vitally important.

Since 1993 the Investor Protection Trust has worked with the States and at the national level to provide the independent, objective investor education needed by all Americans to make informed investment decisions. The Investor Protection Trust strives to keep all Americans on the right money track. For additional information on the IPT, visit www.investorprotection.org.

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