What Is A Bond?

What Is A Bond?

Government bonds offer the greatest degree of security, as they are backed by the “full faith and credit” of the U.S. Government. It’s entirely unlikely the U.S. Government will default on repayment of this loan. If it does, your paltry bond will probably be the least of your worries.

Bonds are generally referred to as “fixed-income investments” because they make regular interest payments up until the date of maturity. The longer a bond’s maturity, the more its price will be affected by fluctuating interest rates. To compensate for the greater price risk, long-term bonds generally offer higher interest rates than intermediate or short-term bonds.

Over time, bonds have generally proven to provide higher returns than cash investments and to perform ahead of inflation.

Bond Facts

Nearly 1 out of every 5 households in America owns savings bonds.
The safest and most affordable bond is the Series EE Savings Bond, issued at a discount of half its face value (ranging from $50 to $10,000).
55 million Americans own Series EE.
The minimum investment for a Series EE is $25. (Based on a study in 2005).