Planning matters

Bond Basics

Stocks & Bonds. A pair that go together like peanut butter & jelly or Ernie & Bert. But, how much do you really know about this crucial component of your investment portfolio? This coming Thursday, August 19, you’ll have a chance to find out in our Ripple Event: Bond Basics. We’ll do an overview of bonds, specifically talking about municipal bonds and their tax benefits. Register for the webinar via the following link:

After registering, you will receive a confirmation email containing information about joining the webinar.

And because we can’t get enough bond talk and education, let’s talk about three of the common types of bonds.

Let’s first talk about what exactly a bond is. A bond is a type of IOU – whoever issues the bond is borrowing money from the buyer of the bond. In return, the bond issuer agrees to pay the bondholder back on a specific day in the future, plus regular interest payments. Like stocks, bonds can be bought and sold by different investors even after they were originally issued.

The type of bond depends on who’s issuing it, meaning who’s borrowing the money. Let’s review three of the common bond types:

Government Bonds

Government bonds are arguably the most common type of bond, and often considered to be the least risky. They’re issued and guaranteed by the central governments of developed countries or emerging markets. T-bills, T-bonds and T-notes are all bonds issued by the US Treasury.

Corporate Bonds

Like buying stocks in companies, you can also buy bonds from them. Corporate bonds can also fall be risky, depending on the company. Generally speaking, the more financially stable a company is, the higher their credit rating is, mean the less risk their bonds will be.

Municipal Bonds

A municipal bond (or a “muni”) is issued by a local government, like a city, state or county, to help raise money for public projects like building schools, fixing bridges, etc. There are two main types of munis:

  1. General obligation bonds, which are a promise by the issuer to levy taxes sufficient to make full and timely payments to investors.
  2. Revenue bonds, which are bonds whose interest and principal are backed by the revenues of the project that the bonds are funding.

In our Ripple Event on Thursday, we’re going to deep dive into muni bonds, talking about the tax benefits they offer and how they can be used in your investment portfolio. We hope you join us!


Written By Rachel Gorretta