Bonds: The Defensive Corner of a Portfolio
Educational content only — not financial advice. Canada-first. Independent of any brokerage.
What a bond is
A bond is a loan to a government or corporation. You receive interest and principal back at maturity. Price moves inversely to yields.
Why investors hold bonds
Stability, diversification versus stocks, and a buffer during equity drawdowns. They’re not risk‑free but reduce overall volatility.
Risks to know
Interest‑rate risk, credit risk, and inflation risk. Longer duration increases sensitivity to rate changes.
Practical ways to buy
For beginners, broad bond ETFs and short‑duration ETFs are simple options. Laddering GICs or T‑Bills can match short‑term cash needs.
Where bonds fit for long-term investors
Bonds dampen equity volatility and can fund near-term spending. They are not risk-free: interest-rate moves and credit events still matter. Choose duration and credit quality that match your horizon, implement with low-cost bond ETFs, and keep the stock/bond mix intentional via asset allocation.
Canadians often hold bond ETFs inside registered accounts; see TFSA vs RRSP.