Bonds are one of a group of so-called “securities,” contracts used by companies and governments to raise money for their operations with an underlying asset as security. For companies, the company’s goods, revenue streams and properties secure the bond. Government bonds are secured by future tax receipts.<\/p>\n
Bonds and stocks are completely different animals. While stocks are equity, bonds are debt, secured by the assets of the company that issues the bond.<\/p>\n
Bonds come with their own unique terminology. The best way to start thinking about them is to view them in the same way as the debt you already understand, like a mortgage. When you take out a home loan, the underlying asset (the thing that will secure your loan) is the house and property on which the house sits. Your house is a security, and you promise to pay back the lender (who is investing in you) with a revenue stream: a portion of your income. Let’s look at a few bond terms:<\/p>\n
Bonds are issued for the same reasons as stocks; because a company or government wants to raise more money than its operations, private investors and bank loans can support. Usually bonds are for a specific purpose. You’ve heard of “school bonds” and “road bonds,” issued by local governments to fund public construction projects. These are usually repaid using future tax revenue.<\/p>\n
Corporations or utility companies may issue bonds to fund their own capital investments such as research and development or constructing new facilities. Federal governments may issue bonds to pay for operations (think wars and social programs) or to manipulate the money system.<\/p>\n
Bond math is ridiculously complicated, but you can bypass most of it by buying shares in a bond fund<\/strong>, a pool of money invested in a wide variety of bonds. As with stocks, the market has already done the math for you. Most major online brokerages<\/a> allow you to buy shares in bond funds. Buying individual bonds<\/a>, however, is far more complicated; only very industrious investors would be advised to pursue individual bonds for their portfolios, as the investment requires a great deal of research.<\/p>\n","protected":false},"excerpt":{"rendered":" Bonds are one of a group of so-called “securities,” contracts used by companies and governments to raise money for their operations with an underlying asset as security. For companies, the company’s goods, revenue streams and properties secure the bond. Government bonds are secured by future tax receipts.<\/p>\n Bonds and stocks are completely different animals. While stocks are equity, bonds are debt, secured by the assets of the company that issues the bond.<\/p>\n Bonds come with their own unique terminology. The best way to start thinking about them is to view them in the same way as the debt you already understand, like a mortgage. When you take out a home loan, the underlying asset (the thing that will secure your loan) is the house and property on which the house sits. Your house is a security, and you promise to pay back the lender (who is investing in you) with a revenue stream: a portion of your income. Let’s look at a few bond terms:<\/p>\n","protected":false},"author":3092,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[492],"acf":[],"_links":{"self":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts\/245702"}],"collection":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/users\/3092"}],"replies":[{"embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/comments?post=245702"}],"version-history":[{"count":0,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/posts\/245702\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/media?parent=245702"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.getrichslowly.org\/wp-json\/wp\/v2\/categories?post=245702"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}The language of bonds<\/h2>\n