The Money Farm Team

Bonds are regarded as a defensive asset class since they are less volatile than other asset classes like equities. Many investors use bonds as a source of diversification in their portfolios to assist minimize volatility and total portfolio risk. Is it vital to include bonds in your portfolio? Bonds offer better yields than bank accounts, […]

Bond rating agencies and credit bureaus are similar in that they both do financial research to establish creditworthiness. A bond rating agency, on the other hand, analyzes whether issuers of debt products such as bonds are likely to meet their obligations to pay interest and repay the principal you gave them, rather than appraising an

Bonds are generally advertised as being less risky than stocks, which they are for the most part, but that doesn’t mean you can’t lose money if you purchase them. When interest rates rise, the issuer experiences a negative credit event, or market liquidity dries up, bond prices fall. Bond gains can also be eroded by

Most bonds pay a set interest rate that rises in value when interest rates fall, increasing demand and raising the bond’s price. If interest rates rise, investors will no longer favor the lower fixed interest rate offered by a bond, causing its price to fall. In practice, zero-coupon bonds are a good example of how

They give a steady stream of money. Bonds typically pay interest twice a year. Bondholders receive their entire investment back if the bonds are held to maturity, therefore bonds are a good way to save money while investing. Companies, governments, and municipalities issue bonds to raise funds for a variety of purposes, including: Investing in

A bond’s price might change in the secondary market. The yield, current interest rates, and the bond’s rating are the most important aspects that influence the price of a bond. The present value of a bond’s cash flows, which are equal to the principal amount plus all remaining coupons, is the yield. What drives the

When interest rates are exceedingly low, a “inverted yield curve” might occur in the bond market. Why are bonds falling in value? Bonds are generally advertised as being less risky than stocks, which they are for the most part, but that doesn’t mean you can’t lose money if you purchase them. When interest rates rise,

When investors look back on how their portfolio did at the end of this unusual year, they’ll be faced with a fundamental question: Why do I own bonds? For example, the Vanguard Total Bond Market ETF (BND) is down about 2% this year. If you assume a 5% increase in inflation in 2021, BND has

Inflation has been rising as a result of fiscal stimulus, which has put a lot of money in people’s pockets, and a strained supply chain that has been unable to keep up with demand. The real yield (inflation-adjusted) can be negative when inflation is strong and bond yields are low. Real yields are currently -4

Bonds are generally advertised as being less risky than stocks, which they are for the most part, but that doesn’t mean you can’t lose money if you purchase them. When interest rates rise, the issuer experiences a negative credit event, or market liquidity dries up, bond prices fall. Bond gains can also be eroded by