Bonds are basically loans that investors provide to a range of borrowers, including businesses and the government. These agreements last for set periods, typically a few years, and once those periods are over, lenders are paid back.  Depending on the type of bond lenders may receive interest paid at set periods during the term of the bond or all at once at the end.   Having bonds on your portfolio can be helpful for financial planning, coming with many unique benefits. Here’s why many investors choose to have bonds.

Why Investors Should Consider Bonds

1. Security

Typically provided to large corporations and governmental agencies, bonds are generally not as risky as stocks. Once the agreed-upon period is over, you receive the money you put in back along with any accumulated interest.

The agreement isn’t reliant on volatile market trends or fluctuating interest rates. Municipal bonds, which provide loans to the government, are considered less risky than corporate varieties that involve businesses.

2. Predictability

Effective financial planning requires some level of knowledge of what investments might yield. Predictability is particularly important for those nearing retirement, sending kids to college, or preparing to buy homes, as losses can lead to harder hits.

With bonds, investors know their interest rates and agreement durations, so financial planners can predict the approximate payouts. Payout timing and estimates help you plan for major purchases and lifestyle changes in the coming years.

3. Diversification

For those who are interested in some higher-risk, higher-return investments, including stocks, bonds offer relatively safe ways to diversify. Having a wide-reaching portfolio with money in multiple accounts and forms can create a safety net.

Even if the stock market drops, bonds usually produce some returns to keep investors ahead since they are connected to private and governmental entities.

If you need help with investing, contact Stephan and Associates in Xenia, OH. Founded by Brian Stephan, CEO and General Manager, this financial planning firm offers wealth management assistance for people looking to plan for the future. Visit their website to see a full list of services, or call (937) 374-2002 to request a consultation.

The content of this article is for informational purposes only and should not be considered a recommendation of any particular security, strategy or investment product or investing advice of any kind. Information contained herein has been obtained from sources deemed reliable but Spire Wealth Management, LLC and its affiliates do not guarantee its accuracy. The views and opinions expressed in this article are those of the authors and are subject to change. Index information is provided for illustrative purposes only. Indexes are unmanaged, do not reflect deduction of fees and expenses and are not available for direct investment. Investing involves risk, including the possible loss of principal.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliated company, Spire Securities, LLC., a Registered Broker/Dealer and member FINRA/SIPC.

Diversification neither assures a profit nor guarantees against loss in a declining market.