They aren't sexy, but they do have a place in your portfolio. But, it is important to remember that bonds and stocks tend to do well at different times in the economic cycle . Bonds perform well when stocks lag. This is why diversifying your portfolio helps keep your returns high during bad times. Retirees often rely on the predictable income generated by bonds.
Bonds also make sense for young investors with regards to college savings.
College funds aren't the type of investment you want to take a huge amount of risk with. Contrary to popular belief, you can make money beyond the interest income by the bond appreciating in value. The trading price of a bond is its par value . This value fluctuates on a daily basis as the outlook on interest rates change. If rates decline, your bond will increase in value and you can sell it at a premium.