Introduction 1 About This Book 2 Conventions Used in This Book 5 What You''re Not to Read 5 Foolish Assumptions 5 How This Book Is Organized 6 Part 1: A Quick Guide to the Fixed-Income Universe 6 Part 2: Bonds of Many Distinct Flavors 6 Part 3: Bonds as Portfolio Cement 7 Part 4: A Manual for Smart Bond Shopping 7 Part 5: Bonds as Good Friends of Retirees 7 Part 6: The Part of Tens 7 Icons Used in This Book 7 Beyond the Book 8 Where to Go from Here 8 Part 1: A Quick Guide to the Fixed-Income Universe 9 Chapter 1: Buying Bonds: In Your Best Interest 11 Understanding What Makes a Bond a Bond 12 Choosing your time frame 13 Picking who you trust to hold your money 14 Recognizing the difference among bonds, stocks, and cryptocurrencies 15 Why Hold Bonds? (Spoiler Alert: It Isn''t to Make You Rich) 16 Identifying the best reason to buy bonds: Diversification 16 Going for the cash 17 Investing in an Era of Low, Low Interest Rates 19 All this fuss about the Fed 20 Real (after-inflation) interest rates matter most 20 Don''t get depressed over depressed rates 21 Introducing the Major Players in the Bond Market 22 Supporting (enabling?) your Uncle Sam with Treasury bonds 22 Collecting corporate debt 23 Demystifying those government and government-like agencies 23 Going cosmopolitan with municipal bonds 24 Buying Solo or Buying in Bulk 26 Picking and choosing individual bonds 26 Going with a bond fund or funds 26 Chapter 2: Constructing Your Portfolio''s Foundation 29 Focusing on Your Objectives 30 Deciding what you want to be when you grow up 31 Picturing your future nest egg 31 Understanding the Rule of 20 (preferably 25) 32 Choosing your investment style 33 Making Your Savings and Investment Selections 34 Saving your money in safety 34 Investing your money with an eye toward growth 36 Understanding Five Major Investment Principles 38 1 Risk and return are two sides of the same coin 38 2 Financial markets are largely efficient 39 3 Diversification is just about the only free lunch you''ll ever get 39 4 Reversion to the mean -- it means something 40 5 Investment costs matter -- a lot! 41 Chapter 3: A (Mostly) Heroic History of Bonds 43 Reviewing the Triumphs and Failures of Fixed-Income Investing 44 Beating inflation, but not by very much 44 Serving a savoir in times of distress 45 Looking Back Over a Long and (Mostly) Distinguished Past 47 Yielding returns to generations of your forebearers 48 Gleaning some important lessons 49 Realizing How Crucial Bonds Are Today 52 Viewing Recent Developments, Largely for the Better 54 Chapter 4: Interest, Sweet Interest 57 Calculating Rates of Return -- Tougher than Deciphering Babylonian 58 Cutting deals 59 Changing hands 59 Embracing the complexity 60 Conducting Three Levels of Research to Judge the Desirability of a Bond 60 Level one: Getting the basic information 61 Level two: Finding out intimate details 63 Level three: Examining the neighborhood 66 Understanding (and Misunderstanding) the Concept of Yield 69 Coupon yield 70 Current yield 70 Yield-to-maturity 70 Yield-to-call 72 Worst-case basis yield 72 The 30-day SEC yield 73 Appreciating Total Return (This Is What Matters Most!) 73 Figuring in capital gains and losses 73 Factoring in reinvestment rates of return 74 Allowing for inflation adjustments 74 Weighing pretax versus posttax 75 Measuring the Volatility of Your Bonds 76 Time frame matters 76 Quality counts 76 The coupon rate matters, too 77 Foreign bonds, added risk 78 Revisiting the Bonds of Babylonia 78 Interest short run, interest long run 79 Interest past, interest future 79 Part 2: Bonds of Many Distinct Flavors 81 Chapter 5: US Treasury Bonds: As Safe as Safe Can Be 83 Investing with Uncle Sam in Myriad Ways 84 Savings bonds as gifts or small investments 85 Treasury bills, notes, and bonds for more serious investing 90 Treasury inflation-protected securities (TIPS) 91 Easing Your Fears of Default 93 Deciding Whether, When, and How to Invest in Treasuries 94 Figuring out whether you want Treasuries 94 Picking your own maturity 97 Adding in some inflation protection 99 Entering the Treasury Marketplace 99 Buying direct or through a broker 100 Choosing a new or used bond 101 Tapping Treasuries through mutual funds and exchange-traded funds 102 Chapter 6: Getting Down to Business: Corporate Bonds 103 Why Invest in These Sometimes Pains-in-the-Butt? 104 Comparing corporate bonds to Treasuries 104 Considering historical returns 106 Getting Moody: The Crucial Credit Ratings 107 Revisiting your ABCs 108 Gauging the risk of default 110 Special Considerations for Investing in Corporate Debt 111 Calculating callability 112 Coveting convertibility 112 Reversing convertibility --imagine that 113 Appreciating High Yield for What It Is 114 Anticipating good times ahead 114 Preparing for the bad times 115 Investing in high yields judiciously 115 Chapter 7: Powerful and a Tad Mysterious: Agency Bonds 117 Identifying the Bond Issuers 118 Slurping up your alphabet soup 118 Separating federal agency bonds from GSEs 119 Sizing up the government''s actual commitment 120 Introducing the agency biggies 120 Comparing and Contrasting Agency Bonds 125 Eyeing default risks, yields, markups, and more 125 Weighing taxation matters 126 Discos, floaters, and step-ups 127 Banking Your Money on Other People''s Mortgages 127 Bathing in the mortgage pool 128 Deciding whether to invest in the housing market 128 Considering Agencies for Your Portfolio 129 Chapter 8: (Practically) Tax-Free: Municipal Bonds 131 Appreciating the Purpose and Power of Munis 132 Sizing up the muni market 133 Comparing and contrasting with other bonds 133 Delighting in the diversification of municipals 134 Knowing That All Cities (Bridges or Ports) Are Not Created Equal 136 Dealing with the rare default 136 Enjoying low risk 137 Choosing from a vast array of possibilities 138 Consulting the Taxman 139 Bringing your bracket to bear 140 Singling out your home state 141 Matching munis to the appropriate accounts 142 Recognizing Why This Chapter Is Titled "(Practically) Tax-Free: Municipal Bonds" 142 Reckoning with the AMT tax 143 Capping your capital gains 143 Introducing the fully taxable muni 144 Buying Munis Made Easier 144 Chapter 9: International Bonds and Other Seemingly Exotic Offerings 147 Traveling Abroad for Fixed Income 148 Dipping into developed-world bonds 148 Embracing the bonds of emerging-market nations 152 Bond Investing with a Conscience 155 Having faith in church bonds 155 Adhering to Islamic law: Introducing sukuk 157 Sustainability-linked bonds 158 Playing with Bond Fire: Potentially Risky Bond Offerings 161 Rocking with Bowie Bonds 161 Cashing in on catastrophe bonds 162 Dealing in death 162 Dancing in the Flames: Derivatives and Default Bond Products 163 Daring to delve into derivatives 163 Banking on losses with defaulted bond issues 164 Catching a fallen angel 166 Evaluating Exchange-traded Notes 167 What are they? 167 Should you invest? 168 Part 3: Bonds as Portfolio Cement 169 Chapter 10: Return, Risk, and Realism 171 Searching, Searching, Searching for the Elusive Free Lunch 172 Making a killing in CDs yeah, right 172 Defining risk and return 173 Appreciating Bonds'' Risk Characteristics 173 Interest rate risk 174 Inflation risk 175 Reinvestment risk 176 Default risk 176 Downgrade risk 177 Tax risk 178 Fear-of-missing-out (FOMO) risk 178 Regarding all these risks 179 Reckoning on the Return You''ll Most Likely See 181 Calculating fixed-income returns: Easier said than done 181 Looking back at history: An imperfect but useful guide 182 Investing in bonds despite their lackluster returns 184 Finding Your Risk-Return Sweet Spot 187 Allocating your portfolio correctly 187 Tailoring a portfolio just for you 187 Chapter 11: The Art and Science of Portfolio-Building 189 Mixing and Matching Your Various Investments 190 Dreaming of limited correlation 190 Seeking zig and zag with Modern Portfolio Theory 192 Translating theory into reality 192 Appreciating Bonds'' Dual Role: Diversifier and Ultimate Safety Net 194 Protecting yourself from perfect storms 194 Eyeing a centuries-old track record 195 Recognizing Voodoo Science 197 Comparing actively managed funds to index funds 197 Forecasting the future -- and getting it wrong 198 Ignoring the hype 199 Chapter 12: Slicing the Pie: How Much Should Be in B.