Millennials: Think Bonds Are Complicated? This Expert Breaks Down How They Work

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Marc Pfeffer is the Chief Investment Strategist at CLS Investments and he manages bond portfolios. 

The even better news? He breaks down just how bonds work and how they fit into a portfolio, especially for those investors who don't want to take much risk (stocks have flown high this year and could soon fall). 

"In terms of how bonds work, essentially, there is what we call an inverse relationship between the price of a bond and the yield of a bond, meaning that the price of a bond will go down if interest rates move up," Pfeffer said. "In order to earn a higher rate of interest, the price of that bond that you're willing to pay is going to be lower and vice versa."

Of course, if interest rates move down, which may very well happen soon, bond prices will move up (they already have because markets try to anticipate changes before they happen). 

Watch the video above to learn more about how bonds work.

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