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Bonds
Think of a bond as an I.O.U. When you buy a bond, you become a lender, and the bond issuer is the borrower. The bond issuer might be a company, a city, a state, or a federal government agency. As a lender, you receive regular payments, or interest on your investment. At the end of the lending period, you get your money back.
A Portfolio may lose money if it invests in bonds whose issuers cannot meet their obligations to pay interest or principal when due. An issuer may also lower the credit quality of a security if it suffers an adverse change in its financial condition. Lower credit quality would lead to greater volatility in the price of the security.
Why own bonds?
Bonds may be a good choice if you're looking to earn a steady income and the potential to beat inflation, which is why they are sometimes referred to as "fixed income" securities. They pay you interest based on a fixed rate for a specified period of time, thus earning you "fixed income."
These articles are not meant to be a financial plan. A financial plan generally addresses a wide spectrum of financial needs including insurance, savings, investments, tax and estate planning.