Bonds are issued by governments and corporations with the purpose of raising money. When you buy a bond, you�re giving them a loan that they agree to pay back with interest. Bonds can have a variety of timelines for paying back interest, as well as a range of ratings from AAA (highest) to D (lowest) which reflect levels of risk.

A bond is a loan an investor makes to the bonds� issuer. When the bond matures, the issuer returns the full principal that was loaned. They also typically pay regular interest payments to investors.

Merrill A Bank of America Company Merrill A Bank of America Company

Open an account

Open Menu bar

Open an account with Merrill

Fixed Income & Bonds Education

Q: What are the different types of fixed income products I can invest in?

Treasuries Corporates CDs Municipals Agencies

Q: How often do bonds pay interest?

Bonds can pay interest across a range of frequencies such as, monthly, quarterly, and at maturity, although semi-annual is the most common.

Q: What is a stock versus a bond?

Stocks give investors a share of ownership in a company. They come with more risk, but they typically offer the potential for higher returns. A bond represents the debt of the issuing entity, which could be a company, government or other organization. They typically offer a lower rate of return, but they can offer a way to generate regular income.

Learn about fixed income investments like bonds, CDs and others

Understand the basics of fixed income securities

What is fixed
income? tab 1 of 3 selected Why invest in
fixed income? tab 2 of 3 Things to
consider tab 3 of 3

What is fixed income?

Fixed income refers to investment securities that pay investors fixed interest payments until the maturity date. The most commonly known fixed income investments are government and corporate bonds, but CDs and money market funds are also types of fixed income.

View transcript (PDF)

In reference to bond return, risk and default potential, past performance does not assure future results.

Income from investing in municipal bonds is generally exempt from Federal and state taxes for residents of the issuing state. While the interest income is tax-exempt, any capital gains distributed are taxable to the investor. Income for some investors may be subject to the Federal Alternative Minimum Tax (AMT).

Investors in mortgage bonds are subject to the general risks of bond investing, including interest rate risk, investment market risk, and issuer credit risk. In addition, mortgage bondholders assume collateral risk (the risk that the property offered as collateral may not have sufficient liquidation value to support repayment of mortgage principal), legal risk (the risk that the terms of the mortgage may be modified by a court of law), and prepayment risk (the risk that the borrower may unpredictably return some or all of the mortgage principal before it is due).

© 2023 DST Systems Inc. All rights reserved.

What are the different types of fixed income products I can invest in?

Treasuries

Treasury bonds are government debt securities issued by the U.S. federal government that have maturities from between a few days and 30 years. They earn periodic interest until maturity and are generally exempt from state and local taxes.

Municipals

A municipal bond is a fixed income security issued by a municipality. Interest income is generally exempt from federal and state taxes, but capital gains distributed are taxable to the investor.Footnote ¹

Corporates

A corporate bond is any bond issued by a corporation for investors to purchase. They're issued in blocks of $1,000 and are a major source of financing in the private sector. Corporate bonds are fully taxable.

Agencies

Agency bonds are government securities issued by entities other than the U.S. Treasury that have a maturity of no more than 30 years. Generally, they are subject to federal and state tax.

CDs

A certificate of deposit (CD) is a bank-issued deposit instrument with a set maturity and interest rate. Maturities range from a few weeks to several years.

Common questions about fixed income

If you're looking for more information, check out these responses to some of the common questions investors have about fixed income

Expand all

How do bonds work?

How can I invest in fixed income?

You can invest in individual fixed income (bond) securities, in fixed income mutual funds or ETFs, or a combination of these investing options.

If you invest in mutual funds or ETFs, you're investing in a basket of many different fixed income investments (which can help provide exposure to various markets, sectors, maturities and credit qualities.) These funds are professionally managed, either actively or passively.

How often do bonds pay interest?

What is a stock versus a bond?

Is a bond a loan?

Want to learn more about fixed income?

Discover more resources related to fixed income investments and enhance your investing knowledge.

Our tools can get you started

Use Merrill's powerful investing tools to get actionable insights and find the best investments for you. Our expertise will help you find ideas, narrow down your options and help you understand individual investments at a glance.

Learn more about Merrill investing tools

Learn about a full range of investment topics

Build foundational investing skills, learn to identify the right assets for your portfolio and discover tools to help you along the way.

Stocks education at Merrill ETFs education at Merrill Mutual Funds education at Merrill Options education at Merrill Annuities education at Merrill

Ready to get started?

Open an account with Merrill

or call us at 888.637.3343

Investing involves risk including the possible loss of principal investment.

Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa.

Footnote ¹ Income from investing in municipal bonds is generally exempt from federal and state taxes for residents of the issuing state. While the interest income is generally tax-exempt, any capital gains distributed are taxable to the investor. Income for some investors may be subject to the federal alternative minimum tax (AMT).

Footnote ² Diversification, asset allocation and rebalancing do not ensure a profit or protect against loss.

5393089

Connect with us:

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF).

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp").

Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation.

Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:

Are Not FDIC Insured	Are Not Bank Guaranteed	May Lose Value
Are Not Deposits	Are Not Insured by Any Federal Government Agency	Are Not a Condition to Any Banking Service or Activity

Privacy | Security | Advertising practices Advertising Practices |

© 2023 Bank of America Corporation. All rights reserved.

4326521

I'd Like to

Discover Merrill

Contact Us

888.637.3343

Connect with us:

Unlimited $0 Trades

With Merrill Edge Self‑Directed, get unlimited free online stock, ETF and option trades with no trade or balance minimumsFooter footnote ^b

Options contracts and other fees may applyFooter footnote ^a

Open an account with Merrill Edge Self-Directed

Footer footnote

Other fees may apply. Free and $0 means there is no commission charged for these trades. $0 option trades are subject to a $0.65 per-contract fee. Sales are subject to a transaction fee of between $0.01 and $0.03 per $1,000 of principal. There are costs associated with owning ETFs. To learn more about Merrill pricing, visit our Pricing page.

Footer footnote

Merrill waives its commissions for all online stock, ETF and option trades placed in a Merrill Edge^® Self-Directed brokerage account. Brokerage fees associated with, but not limited to, margin transactions, special stock registration/gifting, account transfer and processing and termination apply. $0 option trades are subject to a $0.65 per-contract fee. Other fees and restrictions may apply. Pricing is subject to change without advance notice.

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.

The performance data contained herein represents past performance which does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance information current to the most recent month end, please contact us.

Net Asset Value (NAV) returns are based on the prior-day closing NAV value at 4 p.m. ET. NAV returns assume the reinvestment of all dividend and capital gain distributions at NAV when paid.

Market price returns are based on the prior-day closing market price, which is the average of the midpoint bid-ask prices at 4 p.m. ET. Market price returns do not represent the returns an investor would receive if shares were traded at other times.

Returns include fees and applicable loads. Since Inception returns are provided for funds with less than 10 years of history and are as of the fund's inception date. 10 year returns are provided for funds with greater than 10 years of history.

Before investing consider carefully the investment objectives, risks, and charges and expenses of the fund, including management fees, other expenses and special risks. This and other information may be found in each fund's prospectus or summary prospectus, if available. Always read the prospectus or summary prospectus carefully before you invest or send money. Prospectuses can be obtained by contacting us.

Expense Ratio – Gross Expense Ratio is the total annual operating expense (before waivers or reimbursements) from the fund's most recent prospectus. You should also review the fund's detailed annual fund operating expenses which are provided in the fund's prospectus.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation ("BofA Corp.").

Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

Are Not Deposits

Are Not Insured by Any Federal Government Agency

Are Not a Condition to Any Banking Service or Activity

Merrill A Bank of America Company Merrill A Bank of America Company

4326521

(TX11********2V)

Fixed Income & Bonds Education

Learn about fixed income investments like bonds, CDs and others

Understand the basics of fixed income securities

What is fixed income?

See what bonds can do for your portfolio and learn about possible risks.

Bonds Can Offer Investors

Know the Risks Associated with Bonds

Investors Should Consider