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Part I
Bond Apetit!
Chapter 1
The Bond Fundamentals

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In This Chapter

▶ Getting a handle on the nature of bonds

▶ Knowing why some bonds pay more than others

▶ Understanding the rationale behind bond investing

▶ Meeting the major bond issuers

▶ Considering individual bonds versus bond funds

Long before I ever knew what a bond is (it’s essentially an IOU), I agreed to lend five dollars to Tommy Potts, a blond, goofy-looking kid in my seventh-grade class. This was the first time that I’d ever lent money to anyone. I can’t recall why Tommy needed the five dollars, but he did promise to repay me, and he was my pal.

Weeks went by, then months, and I couldn’t get my money back from Tommy, no matter how much I bellyached. Finally, I decided to go to a higher authority. So I approached Tommy’s dad. I figured that Mr. Potts would give Tommy a stern lecture on the importance of maintaining his credit and good name. Then, Mr. Potts would either make Tommy cough up my money, or he would make restitution himself.

“Er, Mr. Potts,” I said, “I lent Tommy five bucks, and – ”

“You lent him money?” Mr. Potts interrupted, pointing his finger at his deadbeat 12-year-old son, who, if I recall correctly, at that point had turned over one of his pet turtles and was spinning it like a top. “Um, yes, Mr. Potts – five dollars.” At which point, Mr. Potts neither lectured nor reached for his wallet. Rather, he erupted into mocking laughter. “You lent him money!” he bellowed repeatedly, laughing, slapping his thighs, and pointing to his turtle-torturing son. “You lent him money! HA … HA …HA …”

And that, dear reader, was my very first experience as a creditor. I never saw a nickel from Tommy, in either interest or returned principal.

Oh, yes, I’ve learned a lot since then.

Investing in Bonds For Dummies

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