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bonds, fixed income, treasuries, inflation protect

Unlike buying a part of a company i.e. buying a share of a company, you could also lend some of your money to a company or another large organization. (like a government, or a canton or...)

A formalized way to lend money in such a way is issuing bonds or obligations, which is basically a contract in which you give money to an organization, and you receive in return a certain interest.

But besides just making live more interesting by giving you another possibility to invest you money, bonds become really a favorite instrument in addition to stocks, as they move differently to stocks, and make for a good diversification.

Of course these bonds once issued can be traded on the secondary market, so the dept can be bought and sold, which of course goes along with the interest.

There are several different types of bonds, different qualities, and so on, but the idea is always the same.

With a standard 0-5 bond we lend X amount to a company XYZ, which in turn gives us so and so much interest for the next n years, when the company returns the lent money.
Bonds run from as short as 30 days all the way to 30 years.
Bonds from less secure companies will have to pay more interest to allow for the bigger risk involved in owning them, and are called, not really flattering: junk bonds.
Sometimes you lend X amount to a company, but instead of receiving a yearly interest payment you get a bigger principal after the bond has run its course.
Some government bonds are linked to the inflation rate, so will always get the same "real" return. TIPS


Another thing worth considering: when figuring out your asset allocation you will undoubtedly come across the question how much you should stick into bonds.
Not an easy question, and we would like to make it even more difficult for you.
For most people there is at least one instrument that behaves much like a bond holding, in as much as it will pay a fixed amount of money every month, which will be available for you when the time comes to retire. Social security and pension schemes (AHV / second pillar).