Bond Investing Basics
What are the bond investing basics, and are stocks more risky than bonds?
Investing in bonds, to put it in simple terms, means you are basically loaning a company or the government money for a specific length of time for a specific rate of interest for the length of the bond.
Many conservative investors and people close to retirement prefer bonds because they are considered safer than trading stocks. Bonds offer a stable rate of return as long as everything goes well for the company. However, they are not risk free. If a company goes bankrupt you are in trouble just ask the folks who had bonds at Enron.
If you are close to retiring and looking for retirement income investing opportunities then bonds are probably your safer bet. Just be aware of how bonds are rated.
TIP - The new rule of thumb for diversifying your portfolio between stocks and bonds is 120 minus your current age. The result is the percentage you should have invested in stocks.
As an example:
If you are 35 years old.
So as a rule of thumb you would want to own 85% stocks and 15% bonds or other fixed-income securities at age 35.