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May 30, 2024 6:10 AM - Parth Sanghvi(Last modified: Aug 19, 2024 7:31 AM)
Bonds are a fundamental part of the investment landscape, offering a stable income stream and serving as a key component of diversified portfolios. Here's what you need to know about bonds and how to invest in them effectively.
Bonds are debt securities issued by corporations, governments, or municipalities to raise capital. When you buy a bond, you're essentially lending money to the issuer in exchange for periodic interest payments, known as coupon payments, and the return of the bond's face value when it matures. Bonds are typically less volatile than stocks, making them a popular choice for income-focused investors.
Example: U.S. Treasury bonds are a prime example of government bonds, offering safety and stability to investors.
Application: Consider using FMP's Bond Market API to track bond prices, yields, and other key metrics.
Why invest in bonds?
Bonds provide a steady income stream through interest payments and are generally less risky than stocks. They can also act as a hedge against market volatility, preserving capital during downturns.
Example: During a stock market decline, bonds often retain their value, offering a safe haven for investors.
Risks of Bond Investing
While bonds are less risky than stocks, they are not without risks. Interest rate risk, credit risk, and inflation risk are key concerns. It's important to diversify your bond investments to manage these risks effectively.
Example: Diversifying across different bond types and issuers can help mitigate the impact of a default or rising interest rates.
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