VineLesson 48 · Written for kid, teen, and little
Bonds — the safer cousin
Why grown-ups slowly add bonds with age.
A stock makes you a part-owner of a company. A bond is different — it is a loan you make to a company or government, usually with promised interest payments. Many high-quality bonds fluctuate less than stocks and can provide steadier income. But a borrower might fail to pay, and a bond's market price can fall when interest rates change. People choose a mix of investments to fit their goals and risks. 📜
Words to know
7Bond
A loan to a company or government that promises repayment and usually interest. The borrower can miss payments.
Face value
The amount the issuer promises to repay at maturity. It can differ from the price you paid; default can prevent full repayment.
Coupon
For a fixed-rate bond, the promised interest based on face value. A 4% annual coupon on $1,000 face value is $40 a year.
Maturity
The date the issuer is scheduled to repay the face value. It is not a promise that you recover your purchase price.
Yield
A percentage measure of bond income or expected return. Current yield is annual coupon payments divided by market price; it is not total realized return.
Principal
The original amount of money you lent or invested.
BND
Bonds are loans to issuers. BND tracks a broad index of taxable investment-grade bonds denominated in U.S. dollars; it does not hold every bond.
Your grandma is 70 and wants to review the risks in her retirement savings. Which answer recognizes that different investments have different risks, before choosing a mix for her needs?
In the full lesson
- 1Make the call
Vine has 107 lessons like this one, each written three ways so a 7-year-old and a 17-year-old both get a version that fits.
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