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Bond Investing For Dummies, 2nd Edition


Your friendly guide to navigating the bond and bond fund market

Bonds and bond funds can be among the safest and most reliable investments you make to ensure an ample and dependable retirement income — if you choose wisely! This plain-English guide explains the pros and cons of investing in bonds, how they differ from stocks, and the best (and worst!) ways to select and purchase bonds.

  • Bond appetit — get a crash course on what makes a bond a bond, how they're bought and sold, and how they're rated
  • Not your grandfather's bonds — discover the advantages and potential drawbacks of bonds issued by the U.S. Treasury, corporations, government agencies, municipalities, and other (sometimes more exotic) entities
  • To risk or not to risk — assess just how much investment risk you should be taking and how — by using a mix of bonds — you can minimize that risk for optimal return
  • Bonds away — grasp the role of bond brokers, get the scoop on researching bond prices and true yields, and find out how to avoid getting stuck with fixed-income rip-offs
  • Protect your bond nest egg — find out if your bond portfolio is enough to replace your paycheck — and pare down or beef up your fixed-income allocation accordingly

Open the book and find:

  • The key reason to invest in bonds or bond funds
  • An introduction to Treasuries, corporate bonds, and more
  • The science of portfolio building
  • Guidance for making the right bond selections
  • The 4-1-1 on interest and taxes on interest
  • Tips for working with a bond broker or agent
  • Common misconceptions about bonds
  • A helpful Q&A with bond fund guru Dan Fuss

Learn to:

  • Buy and sell bonds and bond funds
  • Measure bond returns and risk
  • Diversify your portfolio
  • Avoid common investing mistakes

Russell Wild, MBA, is the author or coauthor of many nonfiction books, including Exchange-Traded Funds For Dummies, Index Investing For Dummies, and One Year to an Organized Financial Life. He is a NAPFA-certified financial advisor, registered with the Pennsylvania Securities Commission.

Introduction 1

Part I: Bond Appetit! 9

Chapter 1: So You Want to Be a Bondholder 11

Chapter 2: Developing Your Investment Game Plan 23

Chapter 3: The (Often, But Not Always) Heroic History of Bonds 35

Chapter 4: Sweet Interest Is the Name of the Game 49

Part II: Numerous and Varied Ways to Make

Money in Bonds 71

Chapter 5: “Risk-Free” Investing: U.S. Treasury Bonds  73

Chapter 6: Industrial Returns: Corporate Bonds  91

Chapter 7: Lots of Protection (and Just a Touch of Confusion): Agency Bonds 105

Chapter 8: (Almost) Tax-Free Havens: Municipal Bonds  117

Chapter 9: Le Bond du Jour: Global Bonds and Other Seemingly Exotic Offerings 131

Part III: Customizing and Optimizing Your Bond Portfolio 149

Chapter 10: Risk, Return, and Realistic Expectations  151

Chapter 11: The Science (and Pseudoscience) of Portfolio-Building 169

Chapter 12: Dividing Up the Pie: What Percentage Should Be in Bonds? 179

Chapter 13: Which Kinds of Bonds Make the Most Sense for You? 197

Part IV: Bonds Away! Navigating the Fixed-Income Marketplace 211

Chapter 14: Strategizing Your Bond Buys and Sells 213

Chapter 15: Investing (Carefully!) in Individual Bonds .229

Chapter 16: Picking a Bond Fund That Will Serve You for Life .245

Part V: Bonds As Replacements for the Old Paycheck... 271

Chapter 17: Fulfi lling the Need for Steady, Ready, Heady Cash 273

Chapter 18: Finding Comfort and Security in Old Age    291

Part VI: The Part of Tens  303

Chapter 19: Ten Most Common Misconceptions about Bonds 305

Chapter 20: Ten Mistakes That Most Bond Investors Make 311

Chapter 21: Ten Q & A’s with Bond Guru Dan Fuss 317

Appendix: Helpful Web Resources for Successful Bond Investing 321

Index 325