Bonds are a type of financial asset, with their investors loaning money to the government or businesses for an agreed-upon period of time. The borrower promises to return the money on a set date with regular interest payments. Here are some facts to keep in mind about bonds:

Bond prices as well as interest rates may change while the investor holds the bonds. Those prices and interest rates rise and fall with market fluctuations.

However, the borrower still has to pay out 100% of the principal at the time of maturity. 

You receive fixed income from the borrower over the bond’s life, which turns them into a relatively safe investment strategy.

Some bonds are categorized as high yield, and high yield bonds may come with more credit risk than others.

All asset investments are given an investment grade, and that includes bonds.

Bonds investments provide relative security, which makes them an integral ingredient of a strong portfolio.

They help balance risks out over time. For example, during economic downturns when the stock market plummets, you can weather the storm with the bond payouts.

A bond portfolio consists of different types of bonds offered by various businesses and governments. Bond interest payments can be used to hedge risks of other investments or as supplemental income to boost your total return.

It’s important to understand risk and return before investing in any asset to avoid unexpected short-term and long-term impacts to your finances. A wealth manager can help you walk through any intricacies of those that may be appropriate for your bond investments to make sure you end up with a diversified portfolio.