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<p><b>Introduction </b><b>1</b></p> <p>About This Book 2</p> <p>Conventions Used in This Book 5</p> <p>What You’re Not to Read 5</p> <p>Foolish Assumptions 5</p> <p>How This Book Is Organized 6</p> <p>Part 1: A Quick Guide to the Fixed-Income Universe 6</p> <p>Part 2: Bonds of Many Distinct Flavors 6</p> <p>Part 3: Bonds as Portfolio Cement 7</p> <p>Part 4: A Manual for Smart Bond Shopping 7</p> <p>Part 5: Bonds as Good Friends of Retirees 7</p> <p>Part 6: The Part of Tens 7</p> <p>Icons Used in This Book 7</p> <p>Beyond the Book 8</p> <p>Where to Go from Here 8</p> <p><b>Part 1: A Quick Guide to the Fixed-Income Universe</b><b> 9</b></p> <p><b>Chapter 1: Buying Bonds: In Your Best Interest</b><b> 11</b></p> <p>Understanding What Makes a Bond a Bond 12</p> <p>Choosing your time frame 13</p> <p>Picking who you trust to hold your money 14</p> <p>Recognizing the difference among bonds, stocks, and cryptocurrencies 15</p> <p>Why Hold Bonds? (Spoiler Alert: It Isn’t to Make You Rich) 16</p> <p>Identifying the best reason to buy bonds: Diversification 16</p> <p>Going for the cash 17</p> <p>Investing in an Era of Low, Low Interest Rates 19</p> <p>All this fuss about the Fed 20</p> <p>Real (after-inflation) interest rates matter most 20</p> <p>Don’t get depressed over depressed rates 21</p> <p>Introducing the Major Players in the Bond Market 22</p> <p>Supporting (enabling?) your Uncle Sam with Treasury bonds 22</p> <p>Collecting corporate debt 23</p> <p>Demystifying those government and government-like agencies 23</p> <p>Going cosmopolitan with municipal bonds 24</p> <p>Buying Solo or Buying in Bulk 26</p> <p>Picking and choosing individual bonds 26</p> <p>Going with a bond fund or funds 26</p> <p><b>Chapter 2: Constructing Your Portfolio’s Foundation</b><b> 29</b></p> <p>Focusing on Your Objectives 30</p> <p>Deciding what you want to be when you grow up 31</p> <p>Picturing your future nest egg 31</p> <p>Understanding the Rule of 20 (preferably 25) 32</p> <p>Choosing your investment style 33</p> <p>Making Your Savings and Investment Selections 34</p> <p>Saving your money in safety 34</p> <p>Investing your money with an eye toward growth 36</p> <p>Understanding Five Major Investment Principles 38</p> <p>1 Risk and return are two sides of the same coin 38</p> <p>2 Financial markets are largely efficient 39</p> <p>3 Diversification is just about the only free lunch you’ll ever get 39</p> <p>4 Reversion to the mean — it means something 40</p> <p>5 Investment costs matter — a lot! 41</p> <p><b>Chapter 3: A (Mostly) Heroic History of Bonds</b><b> 43</b></p> <p>Reviewing the Triumphs and Failures of Fixed-Income Investing 44</p> <p>Beating inflation, but not by very much 44</p> <p>Serving a savoir in times of distress 45</p> <p>Looking Back Over a Long and (Mostly) Distinguished Past 47</p> <p>Yielding returns to generations of your forebearers 48</p> <p>Gleaning some important lessons 49</p> <p>Realizing How Crucial Bonds Are Today 52</p> <p>Viewing Recent Developments, Largely for the Better 54</p> <p><b>Chapter 4: Interest, Sweet Interest</b><b> 57</b></p> <p>Calculating Rates of Return — Tougher than Deciphering Babylonian 58</p> <p>Cutting deals 59</p> <p>Changing hands 59</p> <p>Embracing the complexity 60</p> <p>Conducting Three Levels of Research to Judge the Desirability of a Bond 60</p> <p>Level one: Getting the basic information 61</p> <p>Level two: Finding out intimate details 63</p> <p>Level three: Examining the neighborhood 66</p> <p>Understanding (and Misunderstanding) the Concept of Yield 69</p> <p>Coupon yield 70</p> <p>Current yield 70</p> <p>Yield-to-maturity 70</p> <p>Yield-to-call 72</p> <p>Worst-case basis yield 72</p> <p>The 30-day SEC yield 73</p> <p>Appreciating Total Return (This Is What Matters Most!) 73</p> <p>Figuring in capital gains and losses 73</p> <p>Factoring in reinvestment rates of return 74</p> <p>Allowing for inflation adjustments 74</p> <p>Weighing pretax versus posttax 75</p> <p>Measuring the Volatility of Your Bonds 76</p> <p>Time frame matters 76</p> <p>Quality counts 76</p> <p>The coupon rate matters, too 77</p> <p>Foreign bonds, added risk 78</p> <p>Revisiting the Bonds of Babylonia 78</p> <p>Interest short run, interest long run 79</p> <p>Interest past, interest future 79</p> <p><b>Part 2: Bonds of Many Distinct Flavors</b><b> 81</b></p> <p><b>Chapter 5: US Treasury Bonds: As Safe as Safe Can Be</b><b> 83</b></p> <p>Investing with Uncle Sam in Myriad Ways 84</p> <p>Savings bonds as gifts or small investments 85</p> <p>Treasury bills, notes, and bonds for more serious investing 90</p> <p>Treasury inflation-protected securities (TIPS) 91</p> <p>Easing Your Fears of Default 93</p> <p>Deciding Whether, When, and How to Invest in Treasuries 94</p> <p>Figuring out whether you want Treasuries 94</p> <p>Picking your own maturity 97</p> <p>Adding in some inflation protection 99</p> <p>Entering the Treasury Marketplace 99</p> <p>Buying direct or through a broker 100</p> <p>Choosing a new or used bond 101</p> <p>Tapping Treasuries through mutual funds and exchange-traded funds 102</p> <p><b>Chapter 6: Getting Down to Business: Corporate Bonds</b><b> 103</b></p> <p>Why Invest in These Sometimes Pains-in-the-Butt? 104</p> <p>Comparing corporate bonds to Treasuries 104</p> <p>Considering historical returns 106</p> <p>Getting Moody: The Crucial Credit Ratings 107</p> <p>Revisiting your ABCs 108</p> <p>Gauging the risk of default 110</p> <p>Special Considerations for Investing in Corporate Debt 111</p> <p>Calculating callability 112</p> <p>Coveting convertibility 112</p> <p>Reversing convertibility —imagine that 113</p> <p>Appreciating High Yield for What It Is 114</p> <p>Anticipating good times ahead 114</p> <p>Preparing for the bad times 115</p> <p>Investing in high yields judiciously 115</p> <p><b>Chapter 7: Powerful and a Tad Mysterious: Agency Bonds</b><b> 117</b></p> <p>Identifying the Bond Issuers 118</p> <p>Slurping up your alphabet soup 118</p> <p>Separating federal agency bonds from GSEs 119</p> <p>Sizing up the government’s actual commitment 120</p> <p>Introducing the agency biggies 120</p> <p>Comparing and Contrasting Agency Bonds 125</p> <p>Eyeing default risks, yields, markups, and more 125</p> <p>Weighing taxation matters 126</p> <p>Discos, floaters, and step-ups 127</p> <p>Banking Your Money on Other People’s Mortgages 127</p> <p>Bathing in the mortgage pool 128</p> <p>Deciding whether to invest in the housing market 128</p> <p>Considering Agencies for Your Portfolio 129</p> <p><b>Chapter 8: (Practically) Tax-Free: Municipal Bonds</b><b> 131</b></p> <p>Appreciating the Purpose and Power of Munis 132</p> <p>Sizing up the muni market 133</p> <p>Comparing and contrasting with other bonds 133</p> <p>Delighting in the diversification of municipals 134</p> <p>Knowing That All Cities (Bridges or Ports) Are Not Created Equal 136</p> <p>Dealing with the rare default 136</p> <p>Enjoying low risk 137</p> <p>Choosing from a vast array of possibilities 138</p> <p>Consulting the Taxman 139</p> <p>Bringing your bracket to bear 140</p> <p>Singling out your home state 141</p> <p>Matching munis to the appropriate accounts 142</p> <p>Recognizing Why This Chapter Is Titled “(Practically) Tax-Free: Municipal Bonds” 142</p> <p>Reckoning with the AMT tax 143</p> <p>Capping your capital gains 143</p> <p>Introducing the fully taxable muni 144</p> <p>Buying Munis Made Easier 144</p> <p><b>Chapter 9: International Bonds and Other Seemingly Exotic Offerings</b><b> 147</b></p> <p>Traveling Abroad for Fixed Income 148</p> <p>Dipping into developed-world bonds 148</p> <p>Embracing the bonds of emerging-market nations 152</p> <p>Bond Investing with a Conscience 155</p> <p>Having faith in church bonds 155</p> <p>Adhering to Islamic law: Introducing sukuk 157</p> <p>Sustainability-linked bonds 158</p> <p>Playing with Bond Fire: Potentially Risky Bond Offerings 161</p> <p>Rocking with Bowie Bonds 161</p> <p>Cashing in on catastrophe bonds 162</p> <p>Dealing in death 162</p> <p>Dancing in the Flames: Derivatives and Default Bond Products 163</p> <p>Daring to delve into derivatives 163</p> <p>Banking on losses with defaulted bond issues 164</p> <p>Catching a fallen angel 166</p> <p>Evaluating Exchange-traded Notes 167</p> <p>What are they? 167</p> <p>Should you invest? 168</p> <p><b>Part 3: Bonds as Portfolio Cement</b><b> 169</b></p> <p><b>Chapter 10: Return, Risk, and Realism</b><b> 171</b></p> <p>Searching, Searching, Searching for the Elusive Free Lunch 172</p> <p>Making a killing in CDs yeah, right 172</p> <p>Defining risk and return 173</p> <p>Appreciating Bonds’ Risk Characteristics 173</p> <p>Interest rate risk 174</p> <p>Inflation risk 175</p> <p>Reinvestment risk 176</p> <p>Default risk 176</p> <p>Downgrade risk 177</p> <p>Tax risk 178</p> <p>Fear-of-missing-out (FOMO) risk 178</p> <p>Regarding all these risks 179</p> <p>Reckoning on the Return You’ll Most Likely See 181</p> <p>Calculating fixed-income returns: Easier said than done 181</p> <p>Looking back at history: An imperfect but useful guide 182</p> <p>Investing in bonds despite their lackluster returns 184</p> <p>Finding Your Risk-Return Sweet Spot 187</p> <p>Allocating your portfolio correctly 187</p> <p>Tailoring a portfolio just for you 187</p> <p><b>Chapter 11: The Art and Science of Portfolio-Building</b><b> 189</b></p> <p>Mixing and Matching Your Various Investments 190</p> <p>Dreaming of limited correlation 190</p> <p>Seeking zig and zag with Modern Portfolio Theory 192</p> <p>Translating theory into reality 192</p> <p>Appreciating Bonds’ Dual Role: Diversifier and Ultimate Safety Net 194</p> <p>Protecting yourself from perfect storms 194</p> <p>Eyeing a centuries-old track record 195</p> <p>Recognizing Voodoo Science 197</p> <p>Comparing actively managed funds to index funds 197</p> <p>Forecasting the future — and getting it wrong 198</p> <p>Ignoring the hype 199</p> <p><b>Chapter 12: Slicing the Pie: How Much Should Be in Bonds?</b><b> 201</b></p> <p>Why the Bond Percentage Question Isn’t As Simple As Pie 202</p> <p>Minimizing volatility 203</p> <p>Maximizing return 204</p> <p>Peering into the Future 205</p> <p>Estimating how much you’ll need 206</p> <p>Assessing your time frame 206</p> <p>Factoring in some good rules 206</p> <p>Recognizing yourself in a few case studies 207</p> <p>Noticing the Many Shades of Gray in Your Portfolio 212</p> <p>Bonds of many flavors 213</p> <p>Stocks of all sizes and sorts 213</p> <p>Other fixed income: Annuities 214</p> <p>Other equity: Commodities and real estate 215</p> <p>Making Sure That Your Portfolio Remains in Balance 216</p> <p>Tweaking your holdings to temper risk 217</p> <p>Savoring the rebalancing bonus 217</p> <p>Scheduling your portfolio rebalance 218</p> <p><b>Chapter 13: Making Your Preliminary Bond Choices</b><b> 219</b></p> <p>Reviewing the Rationale behind Bonds 220</p> <p>Making your initial selection 220</p> <p>Following a few rules 221</p> <p>Sizing Up Your Need for Fixed-Income Diversification 222</p> <p>Diversifying by maturity 222</p> <p>Diversifying by type of issuer 222</p> <p>Diversifying by risk-and-return potential 223</p> <p>Diversifying away managerial risk 224</p> <p>Weighing Diversification versus Complication 225</p> <p>Keeping it simple with balanced funds (for people with less than $2,000) 225</p> <p>Moving beyond the basic (for people with $2,000 to $4,000) 225</p> <p>Branching out (with $4,000 or more) 226</p> <p>Finding the Perfect Bond Portfolio Fit 226</p> <p>Case studies in bond ownership 226</p> <p>Seeking out the more exotic offerings 232</p> <p><b>Part 4: A Manual for Smart Bond Shopping</b><b> 233</b></p> <p><b>Chapter 14: Planning Your Bond Buys and Sells</b><b> 235</b></p> <p>Discovering the Brave New World of Bonds 236</p> <p>Finding fabulously frugal funds 236</p> <p>Dealing in individual bonds without forking over a fortune 237</p> <p>Deciding Whether to Go with Bond Funds or Individual Bonds 239</p> <p>Calculating the advantages of funds 239</p> <p>Considering whether individual bonds or bond funds make more sense 241</p> <p>Is Now the Time to Buy Bonds? 246</p> <p>Predicting the future of interest rates yeah, right 247</p> <p>Paying too much attention to the yield curve 248</p> <p>Adhering — or not — to dollar-cost averaging 249</p> <p>Choosing between Taxable and Tax-Advantaged Retirement Accounts 250</p> <p>Positioning your investments for minimal taxation 250</p> <p>Factoring in the early-withdrawal penalties and such 252</p> <p><b>Chapter 15: Diving (Carefully!) into the Individual Bond Marketplace</b><b> 253</b></p> <p>Navigating Today’s Bond Market 254</p> <p>Getting some welcome transparency 255</p> <p>Ushering in a new beginning 255</p> <p>Dealing with Brokers and Other Financial Professionals 256</p> <p>Identifying the role of the dealer 257</p> <p>Do you need a broker or agent at all? 258</p> <p>Selecting the right broker or agent 259</p> <p>Checking the dealer’s numbers 259</p> <p>Hiring a financial planner 261</p> <p>Doing It Yourself Online 262</p> <p>If you’re looking to buy 263</p> <p>If you’re looking to sell 264</p> <p>Perfecting the Art of Laddering 265</p> <p>Protecting you from interest rate flux 265</p> <p>Tinkering with your time frame 266</p> <p>Discount bonds or premium bonds? 268</p> <p>Buying and Selling an Individual Bond: My Own Journey 269</p> <p><b>Chapter 16: Choosing Bond Funds Wisely</b><b> 273</b></p> <p>Defining the Basic Kinds of Funds 274</p> <p>Mining a multitude of mutual funds 275</p> <p>Establishing a position in exchange-traded funds 276</p> <p>Considering an alternative: Closed-end funds 278</p> <p>Understanding unit investment trusts 279</p> <p>Knowing What Matters Most in Choosing a Bond Fund of Any Sort 280</p> <p>Selecting your fund based on its components and their characteristics 280</p> <p>Pruning out the underperformers 280</p> <p>Laying down the law on loads 281</p> <p>Sniffing out false promises 281</p> <p>My Picks for Some of the Best Bond Funds 282</p> <p>Short-term, high-quality bond funds 283</p> <p>Intermediate-term Treasury bond funds 286</p> <p>(Mostly) high-quality corporate bond funds 287</p> <p>Junk city: Corporate high-yield funds 288</p> <p>Agency bond funds 290</p> <p>Municipal bond funds: Taxes be damned 291</p> <p>Taxable Muni Bonds 292</p> <p>Global and International bond funds 293</p> <p>Emerging market bond funds 294</p> <p>All-in-one bond funds 295</p> <p>Instant-Ladder, Defined-Maturity Bond Funds (Government, Corporate, Municipal) 298</p> <p>All-in-one bond and stock funds 298</p> <p>Target-retirement date funds (otherwise known as life-cycle funds) 300</p> <p><b>Part 5: Bonds as Good Friends of Retirees</b><b> 303</b></p> <p><b>Chapter 17: Satisfying Your Need for Steady Cash</b><b> 305</b></p> <p>Reaping the Rewards of Your Investments 306</p> <p>Aiming for freedom 306</p> <p>Estimating your target portfolio 307</p> <p>Lining up your bucks 308</p> <p>Finding Interesting Sources of Interest 308</p> <p>Certificates of deposit (CDs) 309</p> <p>Mining the many money market funds 309</p> <p>Banking on online savings accounts 311</p> <p>Considering the predictability of an annuity 311</p> <p>Hocking your home with a reverse mortgage 313</p> <p>Recognizing that Stocks Can Be Cash Cows, Too 313</p> <p>Focusing on stocks with sock-o dividends 314</p> <p>Realizing gain with real estate investment trusts (REITs) 315</p> <p>Taking a middle ground with preferred stock 316</p> <p>Introducing a Vastly Better Way to Create Cash Flow: Portfolio Rebalancing 316</p> <p>Buying low and selling high 318</p> <p>Rolling bond interest back in 320</p> <p>Dealing with realities 320</p> <p><b>Chapter 18: Ensuring Financial Security in Old Age</b><b> 321</b></p> <p>Looking Ahead to Many Years of Possible Portfolio Withdrawals 322</p> <p>Knowing Where the Real Danger Lies: The Risk of Being Too Conservative 323</p> <p>Considering an aggressive approach 323</p> <p>Easing back toward your comfort zone 324</p> <p>Setting your default at 60/40 324</p> <p>Allowing for adjustments to suit the times 325</p> <p>Choosing my own and your ultimate ratio 326</p> <p>Calculating How Much You Can Safely Tap 328</p> <p>Revisiting risk, return, and realistic expectations 328</p> <p>Basing your retirement on clear thinking 329</p> <p>Making the Most Use of Uncle Sam’s Gifts 330</p> <p>Minimizing income is the name of the game 330</p> <p>Lowering your tax bracket through smart withdrawals 331</p> <p><b>Part 6: The Part of Tens</b><b> 333</b></p> <p><b>Chapter 19: Ten Most Common Misconceptions about Bonds</b><b> 335</b></p> <p>A Bond “Selling for 100” Costs $100 335</p> <p>Buying a Bond at a Discount Is Better Than Paying a Premium, Duh 336</p> <p>A Bond Paying X% Today Will Pocket You X% Over the Life of the Bond 336</p> <p>Rising Interest Rates Are Good (or Bad) for Bondholders 337</p> <p>Certain Bonds, Such as Treasuries, Are Completely Safe 338</p> <p>Bonds Are a Retiree’s Best Friend 338</p> <p>Individual Bonds Are Usually a Better Deal than Bond Funds 338</p> <p>Municipal Bonds Are Free of Taxation 339</p> <p>A Discount Broker Sells Bonds Cheaper 339</p> <p>The Big Risk in Bonds Is the Risk of the Issuer Defaulting 340</p> <p><b>Chapter 20: Ten Mistakes Bond Investors Need to Avoid</b><b> 341</b></p> <p>Allowing the Broker to Churn You 341</p> <p>Not Taking Advantage of TRACE 342</p> <p>Choosing a Bond Fund Based on Short-Term Performance 342</p> <p>Not Looking Closely Enough at a Bond Fund’s Expenses 343</p> <p>Going Through a Broker to Buy Treasuries 343</p> <p>Counting Too Much on High-Yield Bonds 343</p> <p>Paying Too Much Attention to the Yield Curve 344</p> <p>Buying Bonds That Are Too Complicated 345</p> <p>Ignoring Inflation and Taxation 345</p> <p>Relying Too Heavily on Bonds in Retirement 345</p> <p>Appendix: Helpful Web Resources For Successful Bond Investing 347</p> <p>Index 353</p>

<p><b>Russell Wild</b> is an experienced financial advisor and writer who has been working in the finance and investment industry for more than 30 years. Russell is the principal of Global Portfolios. He is the author of <i>Exchange-Traded Funds For Dummies</i> and the previous editions of <i>Bond Investing For Dummies.</i></p>

<p><b>Build an all-weather portfolio with bonds</b></p> <p>Looking for income, diversification, and protection from stock market volatility? Look to bonds. <i>Bond Investing For Dummies</i> covers the essentials, including bond returns, risk, and the major factors that influence bond performance. In this latest edition, you’ll find out how today’s interest rates, credit risks, trading transparency, fund choices, online investing portals—and oodles of other things—have changed the bond game. Whatever your level of investing expertise, this is your user-friendly guide to confident bond investing. <p><b>Inside… <ul><li>How to buy and sell bonds</li> <li>Evaluate corporate vs. government bonds</li> <li>Selecting solid bond funds</li> <li>Understanding bond yield, credit risk, and callability</li> <li>Avoiding high commissions</li> <li>Selling at the best price</li> <li>Protecting your portfolio</b></li></ul>

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