Explain like I’m 5. What are bonds, how do they work, should I invest in them over etfs or alongside etfs, and are they worth investing in. Thanks in advance.
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A bond is buying something that is worth a fixed amount in the future for less money now.
So maybe you get a bond that is worth $5 in 5 years, but cost $3 today.
The person selling the bond gets money now, you get more money in the future.
The good: Bonds are very low risk when issued by people you expect to be around and honoring their debts in the future. If you think the United States Government won’t default on their debt, for example, a US savings bond is a very safe thing to buy, as you can feel sure it will be honored at the end of the period.
The bad: Bonds are so safe that they tend to have quite a low interest rate and poor return on investment.
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