What Bonds Have to Offer When you purchase a bond, you are lending money to a government entity or corporation. As a bondholder, you will receive regular principal and interest payments (unless the bond issuer defaults). This may be especially appealing if you want to generate a steady income. Bonds are generally considered to be less volatile than stocks, so they are often used to help counterbalance stock market fluctuations. Bad news for the stock market may be good news for the bond market — but not always. Bond maturities generally range from 30 days to 30 years. It’s possible to trade bonds on the open market before their maturity dates, but the price at which a particular bond can be sold will rise or fall in response to changes in interest rates. Bonds with short-term maturities tend to be less sensitive to interest-rate fluctuations than bonds with longer-term maturities. If you sell a bond before it reaches maturity, you may end up getting more or less than the original investment. Selling a bond at a profit could trigger capital gains taxes. Source: Securities Industry and Financial Markets Association, 2024 (data through Q4 2023) Municipal Corporate U.S. Treasury $4.1 $10.8 $26.4 Publicly traded debt outstanding, in trillions
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