Читать книгу More Straight Talk on Investing - John J. Brennan - Страница 19

A bond is essentially an IOU. When you buy a bond, you are lending your money to the issuer, typically a company, a government agency, or state or local municipality. The issuer is promising to pay you a stated amount of interest on the loan and to return the money at a certain time (the maturity date). When you buy a typical bond, you know in advance how much money you are going to receive in interest and when it is going to come; that's why bonds are called fixed income investments. (You'll often hear a bond's interest rate called the coupon—a term dating to when investors actually clipped coupons from paper bonds and presented them to get their interest.)

Though bond holders are creditors, rather than owners, they care about the soundness of the company or agency that issued the bond because that affects their prospects for payment of interest and repayment of principal at maturity. U.S. Treasury bonds are considered the safest investment in the world because they are backed by the full faith and credit of the U.S. government. Most established companies can be counted on to pay the interest on their bonds and repay the principal at maturity, no matter how their stock prices are faring.

Retirees who need a steady source of income tend to favor bond investments because of the periodic interest payments they provide. But you don't have to be a retiree to appreciate the stabilizing force that bonds can provide in an investment portfolio. As I'll explain later, many stock investors also hold bonds to help smooth out the inevitable fluctuations in the value of their overall investment portfolios.

But bonds have risks. The worst-case scenario is default: The bond issuer runs into trouble and can't pay you the promised interest or return your principal. Fortunately, defaults are relatively uncommon. A much more immediate risk involves bond prices. Existing bonds are constantly being traded on the market, and their value changes along with market interest rates. That's no problem for you if you don't need to sell your bond before its maturity date, but for those who do need to sell, the changing prices can result in losses. Also, if you invest in a bond mutual fund, your share price and the income payments you receive will fluctuate based on the ups and downs of the underlying bonds and as the fund buys and sells its holdings.

Finally, there is the invisible risk of inflation. There have been periods when the interest paid on bonds did not keep up with rising prices, so that bond investors were steadily losing purchasing power. At one point in the 1970s, bonds were facetiously known as certificates of confiscation.