Bond Investing 101--A Beginner's Guide to Bonds

Bond Investing 101--A Beginner's Guide to Bonds

Most investors include bond ETFs or mutual funds in their portfolio. Yet do we really understand how bonds work. For example, when interest rates go up, the value of existing bonds go down. Why? And are all bonds more or less the same?

These are important questions for investors, particularly those near or in retirement. For retirees, like myself, we tend to invest more of our portfolio in bonds and fixed income. We better know what we are doing.

In this video, I'll cover everything you need to know to invest in bonds and bond funds with confidence.

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ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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[BY-ixye]

Hi Rob, thank you for what you do. The way you explained the concepts was easy to follow for beginners. I wish I had someone like you teaching me in school. You would be a great professor.

[Hello-rllp]

I learned more from this 45-minute video than an entire semester of Finance. It was concise but detailed.

[marygaus]

Rob - The way you organize your thoughts is absolutely FABULOUS. I’ve never really understood bonds so I’ve avoided them. Until now! In 45 minutes, you cleared up my confusion and I now have the confidence to consider including them in my asset allocation. I’m within 7 or 8 yrs of retirement so it’s high time. Thank you!

[ReuvenLerner]

I've been searching for a while for an explanation of bonds with this level of depth and clarity, and I'm delighted that I kept looking! This is precisely the introduction that I needed, explaining the terminology and investing strategies in a straightforward way. Thanks so much for your work!

[SecondActswithMarco]

This an excellent explanation of one of the most distasteful subjects: bonds. Most investors buy bonds to counter balance the rise and falls of stocks. But so many times they don't inversely correlate. I know bonds correlate to interest rates but still...these buggers are just frustrating. Bond price goes up and yields go down...this is so confusing for the laymen...

[happytravels]

Rob, thank you for making this video! I understand the relationship between interest rates and individual bond prices, but I’ve always wondered how it affected a bond ETF or mutual fund. I’ve never heard anyone else address this topic before. Your explanation makes me a bit more comfortable keeping some bonds in my portfolio going forward with the risk of rising rates. They are kind of like dividend stocks in that even if their price goes down, their yield goes up! I look at it as a win win either way with both. On a side note, I love your laid back, calm presentation style, and lack of click bait titles👍

[ivanbarroso]

This really helped me understanding the overall bond economy, thank you

[elsemuller]

2 years after the video was aired Rob Bergers strategy to invest half in traditional bonds and half in TIPS (following David Swansons approach) was very good. Despite their negative yield at the time. As he said "just in case inflation rises"...
Same with his attitude towards the hyped ARK Funds: just before their total decline he explained why he would never invest into them.

[adamdahn]

As someone who is new to bond investing, my question in... is buying bond funds actually 'safe' enough to consider part of your balance portfolio? (to offset risk of stocks)

[AlvaSudden]

I buy individual bonds, and don't find it a problem to keep records. I like 'em because I know exactly what my return is. Occasionally I sell one but then I have to figure capital gain/loss, which is a pain. My bond portfolio is about 600K, half in IRA. I just want people to know it's doable (and fun to pick out bonds). During Covid, airline bonds were an amazing deal. Should sell them now, maybe I will....

[esfanintan]

Instead of bond why don’t we invest 70% stock and 30% cash?

[buttonsplaymusic]

Please do an update for 2023, when rates have gone up the way they have. Not a new video maybe, but something to add onto this one.

Maybe during that video, you could also contrast how bonds look to the investor in the period of time in this video, versus current. And maybe you could say, the best time to buy Xtype of bond would have been DATE, and this other type of bond DATE, because, but the worst time would have been DATE because.

And maybe you could talk about the new SGOV etf and compare it.

[dan-kx]

Great video!! I think there's one small issue at 3:22, when you talk about a $10K bond with 2% interest ($20). The video says, "Whatever the interest is, you're going to get that every 6 months." I interpret that to mean you'll receive $20 every 6 months, but I think you meant $20 per year split into 2 installments. Otherwise the bond would pay $40/year or a 4% coupon. Anyway, loved the video -- super informative.

[victorm.perezmora]

What happen if withdrawal an amount, let say 10%, before maturity?

[rickm]

Thanks for taking the time to do this!

[Mourik]

But in a etf or you stack your self with dollar cost averaging you don’t really have that problem especially when you do short term bonds. I use VEMT etf. Government emerging market bonds and VUTY usd government bonds. Off course I also have vti. And it works like a charm.

[DeepakSingh-hler]

Amazing video to learn about, very informative & real life examples.

[Puffintrading]

Thanks Rob. Really helpful. The only thing I don’t think you touched on was selling out of your bond fund. If you wait until maturity on a treasury bond, you get your principle back, weather or not rates have gone up or down. What happens in a bond fund as there is no maturity date? If in 5 or 10 years you want to sell but the fund has lost value, isn’t that a risk compared to holding a 5 year or 10 year treasury to maturity? Thanks!

[tubetravel]

I'm guessing you have had an interesting couple of years if youve been involved in bonds

[icemorewaterless]

This is the best introduction video on bond investing I've come across in a long time. Instant subscribe! Please never stop educating the world with your knowledge and the fascinating delivery of that knowledge.