I. Bonds For all practical purposes, a bond is a glorified loan. This lingo makes it much easier to think of a loan as something that may be bought and sold like any other investment. From this perspective, making a loan is very similar to buying a stock. Of course, unlike stocks, bonds will give you a definite return on your investment. That certainty makes bonds ideal for people who want to increase their wealth without risking principal, such as a young married couple planning to buy a house in two years, or a family with youngsters who will soon head to college.
Bonds are also a natural choice for retirees who want a guaranteed income from their investments.
Bond Volatility Bonds are not always safe, despite their reputation as a conservative investment. To begin with, remember that some loans are defaulted upon. Companies, cities, and counties occasionally do go bankrupt. U.S. Treasury bonds alone are considered rock solid. Oddly, another source of risk for certain bonds is that your loan may be paid back early, or called.