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Understanding & Investing in Fixed Income


What is a bond?

Bonds are debt securities. When you invest in bonds, you loan your principal for the promise of repayment with interest. However, fixed income products can be complex, don't guarantee against loss and carry different risks.
Fixed income products include, but are not limited to:
  • U.S. Treasuries: Bonds issued by the U.S. government are guaranteed as to the timely payment of principal and interest if held to maturity
  • U.S. government agency bonds: Federal agencies, such as Freddie Mac and Sallie Mae, issue bonds with different terms, structures and risk
  • Corporate bonds: Private companies raise capital by issuing bonds that get grades on their investment quality
  • Municipal bonds: Issued by state and local governments, "munis" may offer income exempt from federal, state and local taxesFootnote 1
  • CDs: Certificates of deposits (CDs) are usually issued by commercial banks and insured by the FDIC
Play video: Bond investing
Bond investing
Where do bonds fit in your portfolio? This tutorial will introduce you to different types of bonds and explore their potential benefits and risks.
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Merrill Edge Investing
Learn at your own pace with online courses that include:
  • Bond market interest rates
  • Buying bonds
  • The process of issuing bonds

How bonds fit within your portfolio

Creating a diversified bond portfolio with appropriate levels of risk that performs reasonably well even when markets don't move as expected can help you stay on course toward your investment goals.
Play video: Asset allocation and your portfolio
Asset allocation and
your portfolioFootnote 2 (1:48)
When deciding how to allocate your money among different investments, be sure to consider your goals, investment experience, time frame, liquidity needs and your comfort level with risk.
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Merrill Edge Investing
You can take online classes that include:
  • Introduction to government bonds
  • Junk bonds
  • Callable bonds

How to choose a bond or CD

Whether you're just starting out or seeking fresh ideas, Merrill provides timely and relevant tools and resources to help you along each step of your investing journey.
Play video: Bond categories
Bond categories (1:34)
This brief video can help you better understand different types of bonds.
Read: Understanding bonds and their risks
Understanding bonds
and their risks
Buying bonds is like riding a seesaw. Bond prices increase when interest rates fall, and vice versa. Understanding this concept is key to bond investing.
Read: Understanding types of bond risks
Criteria to consider
Some of the risks investing in bonds and CDs include:
Fixed income definitions
View fixed income definitions from our Glossary:
  • Bond equivalent yield
  • Callable bond
  • Par value
  • Yield to maturity
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Merrill Edge Investing
Advanced courses about bonds include:
  • Collateralized mortgage obligations (CMOs)
  • Zero-coupon securities
  • TIGRs, CATS and LIONs

Action items for fixed income investing

Identify your objectives, risk tolerance, time horizon, investment experience and liquidity needs
Decide which bonds match your investor profile
Explore the top fixed income performers
Search for bonds
Apply search criteria to thousands of bonds and CDs with our Fixed Income ScreenerPlease login to view content
Keep an eye on specific bonds in your watchlistPlease login to view content
Carefully review the company's information
Analyze your portfolio with our investment tools and calculators
Visit by the Securities Industry and Financial Markets Association (SIFMA)
Get price, ratings and earnings alertsPlease login to view content
View your Watchlist and alerts on the Merrill mobile app

Related resources

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Fixed Income Screener
You can filter a vast universe of bonds and CDs based on specific criteria you choose and adjust.
More you can do
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An investment advisory program that combines the best features of online investing with a professionally managed portfolio.Footnote 1
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 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 and asset allocation do not ensure a profit or protect against loss in declining markets.