| Now, here's the key: If you buy or sell a bond in the market, it may not trade for $1,000. When it is first issued by the company, it will. But as soon as it starts trading, the price will vary. So you could buy the bond for $900. In that case, you'll receive more than 5% per year, because the 5% coupon is based on the $1,000 figure. No matter where the bond is trading, the bond will pay $50 per year in interest. So if you pay $900 for the bond, you'll make 5.6% interest ($50 divided by $900 equals 5.6%). If you pay $1,050 for the bond, you'll make 4.8% ($50 divided by $1,050 equals 4.8%). Here's another important feature: At maturity, a bond pays $1,000, regardless of what you paid for it. It's obvious why you might buy a bond for $900 when you know you'll get $1,000 at maturity, but you may be asking why someone would pay more than $1,000 for a bond if they know they'll lose money at maturity. It's because even with the loss, they may still make more than they would in other places. For example, let's say a bond is trading at $1,050 with a 5% coupon until 2030. Even though an investor will lose $50 at maturity, they will collect $50 in interest per year over the next five years. When you subtract how much the bond loses at maturity from the total amount of interest paid, that comes out to $200, or an average of $40 per year. That equates to 4% per year. With as rocky as the markets have been lately, investors ought to be very happy earning a safe and secure 4% per year. One last thing about bonds - and this is really important - is how they differ from stocks. If you hold a stock for five years, anything can happen. It could go up 1,000%, it could get cut in half, it could go to zero, or it could go anywhere in between. While a bond's price will fluctuate, the bond will be worth $1,000 on its maturity date. The only way it won't is if the underlying company goes bankrupt. So you could own a stock that has putrid earnings and falls 40%. But as long as the company is keeping the lights on, regardless of those putrid earnings, its bonds will be worth $1,000 at maturity. The only way you lose as a bondholder is if the company goes under. If you buy bonds properly, you can be extremely confident you're going to get your money back - and then some. And in this chaotic market, everyone could use a little more certainty. Good investing, Marc P.S. As we've seen with all the tariff announcements, individual events can send the market spiraling... and there's no telling what could be coming next. In a new presentation, I explain how bonds can be a "godsend" for investors in times like these. In fact, they can even generate contractually obligated returns of as much as 200% in as little as four years! Click here to learn why bonds could be exactly what your portfolio needs right now. | 
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