How Does Investing in Bonds Work?

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A bond is a security in which an authorized issuer agrees to pay a holder at a certain time with a certain interest rate. Learn about how some bonds are hard and some are very liquid with help from a licensed financial planner in this free video on bonds and investing.

Part of the Video Series: Bond Investing
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Video Transcript

Hi, my name is Bill Rae. I'm with Alumni Financial Services. I've been in the business and the finance world for well over 20 years, and your question is: How does investing in bonds work? Well, that's an excellent question. Well, I should start off by just giving you we're not here to solicit or to give stock or bond advice in a...but we do want to explain how bonds work. A bond in the finance world is a security in which an authorized issuer agrees to pay a holder. In fancy words, that means I need to borrow money, and I agree to pay you back in a certain time with a certain interest. Now, the other thing we might want to cover is: What is investing? Well, investing is the act of committing your money or capital into an endeavor with the expectation of a reasonable return. So if we put these together and we ask, "How does investing in bonds work?" well, you're going to be putting money or loaning money. They're going to agree to pay you back at a certain time with a certain interest rate. Now, depending upon what bond you're looking at, some are very liquid; some are a little hard. That's when you need to sit down and talk with an adviser. My name is Bill Rae, I'm with Alumni Financial Services, and as always, we're here to help you build wealth.

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