Bonds 101: What investors need to know about the ‘shock absorber of the portfolio’

Group 1 - Bonds are often viewed as less exciting compared to stocks, but they are essential for a well-managed portfolio, especially in a volatile stock market [1] - Bonds provide a guaranteed return with interest over a fixed period, yet many investors lack knowledge on how to evaluate or purchase them [2] - In 2025, Nvidia shares gained approximately 39%, while a 10-year Treasury bill yielded around 4.5%, highlighting the modest returns from bonds but their reliability during market downturns [3] Group 2 - Bonds serve as a "shock absorber" in investment portfolios, with recommendations for investors to include Treasury Inflation Protected Securities (TIPS) to combat inflation [4] - There is a direct correlation between a bond's interest rate and the borrower's creditworthiness, with higher perceived risks leading to higher rates [5] - While bonds offer predictable income, their prices can decline if the issuer's financial situation worsens, and they faced significant challenges in 2022 due to inflation [5]