Bonds and Fixed Income Tutorials
This series introduces bonds and fixed income as a disciplined way to understand time, risk, and contractual cash flows in investing. It guides learners from beginner to intermediate levels through how bonds work, why prices and yields move, and the key risks investors face—interest rates, credit, inflation, liquidity, and embedded options. Rather than treating bonds as “safe” or dull, the series explains them as financial promises whose value depends on uncertainty and time. Using clear explanations and real-world examples, learners explore government and corporate bonds, yield curves, credit spreads, bond funds and ETFs, and practical strategies such as laddering and portfolio allocation. Each tutorial emphasizes sound reasoning over yield chasing, helping readers develop a durable framework for using fixed income thoughtfully within a long-term investment strategy.
Showing 1 to 10 of 19 tutorials (Page 1 of 2)
Money, Time, and Risk: The Bedrock of All Investing
Before you analyze a single bond or stock, you need to understand the three forces that quietly govern all of finance: Time, Risk, and Required Return. This tutorial explains why money today is worth more than money tomorrow, why risk is best understood as uncertainty rather than pure danger, and how these forces combine to determine the price of every asset. Through practical examples and clear mental models, you’ll learn to see the financial world through the lens of discounted cash flows—a foundational skill for any serious investor.
Bonds and the World of Fixed Income: A Beginner’s Guide to Investing in Promises
Bonds are a core building block of predictable investing. They’re not abstract finance jargon, but formal promises: someone borrows money and must repay it with interest on a fixed schedule. “Fixed income” is the broader family of investments that make regular payments and return your principal at maturity, and bonds are the most common example of this. In this tutorial, you’ll see why governments and companies issue bonds instead of selling ownership, why bondholders stand ahead of shareholders in line for repayment, and how investors trade off safety, yield, and price sensitivity. Using simple examples and analogies, you’ll learn to see bonds as contracts for cash flow—and understand their risks and their vital role in a portfolio.
The Anatomy of a Bond: Understanding Cash Flows, Coupons, and Maturity
A bond is, at its core, a loan written down as a contract. One side borrows money, agrees to pay interest regularly, and promises to repay the original amount on a specific date. In this tutorial, we break that contract into its main parts: Face Value (the amount loaned), Coupon (the interest you earn), and Maturity (when and how the loan ends). You’ll learn how to read any bond’s terms, sketch its payment timetable, and see the difference between a lump‑sum repayment and a gradual paydown. Once you understand this “anatomy,” you can start assessing risk, planning your income, and thinking about how bonds are priced and how their cash flows fit your goals.
Bond Prices and Interest Rates: Understanding Why Prices Move
When you buy a bond, its future payments are fixed by contract—but its market price can still change every day. This tutorial explains why that happens. You’ll see why bond prices move in the opposite direction to interest rates, what it means for a bond to trade at a premium, discount, or par, and why some bonds are much more “rate‑sensitive” than others. By the end, you’ll be able to connect any bond‑market move back to one idea: the present value of future cash flows.
Yield Explained: Understanding Bond Yields, YTM, and What Actually Drives Returns
A bond’s yield is often confused with its coupon rate, but they are not the same thing. The coupon tells you how much cash the bond pays each year based on its face value, while yield tells you what return you earn on the price you actually pay today. Yield blends income, price, and time into a single number you can compare across bonds. In this tutorial, you’ll see why the coupon becomes misleading once a bond trades above or below face value, what Current Yield really tells you (and what it ignores), and why Yield to Maturity (YTM) is a useful but conditional forecast rather than a guarantee. By the end, you should be able to treat yields as comparison tools—not promises.
Duration and Interest Rate Risk Explained: Why Bonds With the Same Yield Can Behave So Differently
Yield tells you how much return a bond is expected to deliver. Duration tells you how violently that return can move when interest rates change. Duration is a way to measure how sensitive a bond’s price is to interest rate changes, without needing heavy maths. In this tutorial, you’ll see why two bonds with the same yield can have very different price swings, how duration is a “time‑weighted average” of when you get your money back, and how you can use it as a practical dial to control risk.
Understanding Credit Risk in Bonds: How Default, Downgrades, and Economic Cycles Affect Bond Yields
Why does a corporate bond pay more than a Treasury bond with the same maturity? The answer lies in credit risk—the possibility that the borrower might fail to make payments or see its creditworthiness decline. This tutorial moves beyond interest rate risk to explore default risk, downgrade risk, and the “doubt premium” known as the credit spread. Using the story of a single company’s bond, we’ll show how economic cycles, market sentiment, structural protections, and cash flow fundamentals all influence the yield you earn. By the end, you’ll be able to see yield not just as a return, but as a signal of underlying risk, and evaluate whether the compensation is worth the uncertainty.
Credit Ratings Explained: What They Measure, What They Miss, and Why Markets Usually Move First
Credit ratings are often treated as authoritative safety judgments, yet they are best understood as structured summaries of risk rather than tools for discovering it. This tutorial explains what ratings capture, what they intentionally leave out, and why bond prices often move months before a rating changes. We explore how a single downgrade—especially from investment grade to high yield—can trigger forced selling, sharp price declines, and lasting stigma, creating so-called “fallen angels.” In contrast, improving “rising stars” tend to receive quiet market recognition long before an upgrade arrives. By the end, readers learn how to use credit ratings as a helpful starting point without outsourcing independent judgment.
Inflation, Real Returns, and the Silent Risk: Protecting Your Bonds from Hidden Erosion
Inflation is the invisible enemy of fixed-income investors, quietly eroding the purchasing power of even the safest bonds. This tutorial explains the difference between nominal returns—the interest stated on paper—and real returns(adjusted for inflation). We explore how inflation damages bond portfolios both slowly through cash-flow erosion and rapidly through market repricing. You will also learn how inflation-linked bonds, thoughtful portfolio construction, and strategies like ladders, barbells, and floating-rate instruments can protect your capital. By understanding these tools, you can defend your wealth and ensure your investments maintain purchasing power over the long term.
Embedded Options: Callable, Puttable, and Convertible Bonds
Many bonds carry hidden levers known as embedded options, which can dramatically change their risk and return profile. This tutorial explores callable bonds (where the issuer can repay early), puttable bonds (where investors can demand early repayment), and convertible bonds (which can be exchanged for stock). We explain why these options exist in the market, how they shift control over future cash flows, and the specific risks they create, such as reinvestment risk. Through step-by-step examples, you'll learn how to identify these bonds and decide whether their features justify their yields. By the end, you’ll understand that who holds the option is just as important as the coupon itself.