Buying Bonds: A Primer

If you needed a lesson in how bonds can benefit your portfolio, you've been getting one since mid-July.

As stock prices fell this summer, Treasury bonds rallied to some of their best levels ever. So if all your assets were in the S&P 500, you lost 10% during the third quarter. But if only half your assets were in the broad stock index and the balance was in a fund that tracks the Merrill Lynch Treasury Master Index, the 5.7% return on that index would have pared your loss for the quarter to 2.1%.

This is not to say you should be 50% in bonds. Your circumstances might not warrant your being too concerned about recent losses. At the same time, there are lots of different kinds of bonds, some of which burned investors while Treasuries were raging.

To introduce you to these various possibilities, we've written a fixed-income primer exploring different types of bonds, like junk and munis; how to decide on a bond allocation for your portfolio; insights into the age-old debate of bonds vs. bond funds; and how to choose a bond fund.

And we didn't forget the key question: Is now a good time to buy?

The Series

• Why bother with bonds?
• What are the different types of bonds? (pieces on what bonds have in common, the different kinds of issuers and evaluating interest-rate risk)
• A special focus on muni bonds and the alternative minimum tax
• How much to buy; bonds or bond funds; focus on transaction costs.
• Choosing a bond fund (two parts)
• Is now the time to buy?

As always, let us know what you think.