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Chapter 3: Investing in bonds

Bonds are another building block of most investment portfolios. There are all types to choose from and ways to buy them.

Everybody and every entity can buy bonds. Bonds are used by your municipality to fund a new school or by corporations that need to raise money. When you buy a bond, you're lending someone money. This chapter will look at the various types of government and corporate bonds, from U.S. Treasury securities (T-bills) to savings bonds (I-bonds and EE Patriot bonds) and corporate bond funds.

What you can expect to learn from this chapter:
  • U. S. Treasury securities
    Investing in U.S. Treasury bills, bonds and notes is a risk-free way to earn a guaranteed return. And the income is free from state and local taxes.
  • The I-bond
    The I-bond has a fixed rate of return and an inflation premium repriced regularly. Learn how it works and how to buy it.
  • Series EE Patriot Bond
    The Series EE bond is similar to the I-bond, but it doesn't have the inflation protection.
  • TIPS (Treasury Inflation-Protected Securities)
    Keep your portfolio on top of inflation with TIPS. Find out what they are, what the tax implications are and where to buy them.
  • Corporate bonds
    The riskiest fixed-income investment, corporate bonds are best purchased by individuals through a bond fund.

 

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