Today's Hack

Let’s dive into some frequently asked questions about bonds. Phil explains what they are and how they work.

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Show Notes For This Episode

Other Retirement Facts:

How much do you know about bonds? We’ll share some frequently asked questions and answers in today’s show.

What is a bond?

A bond is another way to invest in a company. You’re loaning a company money, an it’s thought to be more secure than a stock. A bond owner typically has a general guarantee of corporate assets if something goes bad with the company.

What’s the difference between bond funds and an individual bond?

With an individual bond, you’re purchasing a portion of a larger bond offering. They might be in $5,000 or $10,000 increments, depending on the company. If you own an individual bond, you have the option of holding that bond to maturity.

Are bonds risky now?

It’s the teeter-totter concept. Now with rates being low, the risk for a bond is as rates increase your bond value will decrease.

What percentage of assets should you have in bonds?

The 60/40 stock/bond allocation was always the traditional retirement portfolio, but don’t take it at face value that bonds are more conservative. The longer the maturity of your bonds, the more volatility you’ll have.

Listen to the entire episode or use the timestamps below to find out what’s fact or fiction.

[0:28] – What is a bond?

[1:46] – Bond funds vs. individual bond

[5:05] – Cost of bond fund vs. individual bond

[6:02] – Bonds are risky now?

[8:17] – What percentage of assets in bond?

[11:37] – Alternatives to bonds

A Quotable Moment:

“With a bond, you’re really lending your money to the company.”

-Phil Putney

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