The bare minimum we all should know about bonds

Being born in a country with such a tradition in economic meltdowns has its advantages. I hear about bonds all the time in the news, and no much people knows about what they are and how they work.

I tried to inform myself with this series of blogpost a friend recommend to me. The jlcollinsnh’s stock series gave me lots of key points which I believe everyone should know about financials. Those “secrets” are not hard to learn but are impossible to be aware of if you don’t truly care about how economics works.

I have this idea that whether we like it or not, we live in world ruled by money. And even though it might sound complicated and boring, we should all have (at least) some knowledge about stuff like stocks and bonds, inflation and deflation, etc.

If you don’t care about these kind of things, at least read the 3 items I’m going to list downward because I will only take you one minute and you can say that you have learned something today.

If you are really interested in bonds, read the whole jcollinsh post about it. And if you are still hungry for information I suggest you to read all the posts contained in his stock series.

• What bonds are? When you buy stock you are buying a part ownership in a company. W hen you buy bonds you are loaning money to a company, or to the government.

• Bonds provide a deflation hedge. Why? Because deflation means that the price of stuff falls, so when you get paid back the money you’ve lent has more purchasing power.

• Default is the first risk associated with bonds. There are various rating agencies that evaluate their a bond’s worthiness.