How can bonds be used in a diversified investment portfolio?

Bonds can be used in a diversified investment portfolio to balance out risk and potentially provide a stable source of income. Since bonds generally have a lower level of risk compared to stocks, they can act as a cushion for a portfolio during market downturns. Bonds can also provide a consistent income stream in the form of interest payments, making them attractive for investors who are looking for regular income.

Different types of bonds, such as government bonds, corporate bonds, and municipal bonds, can provide varying levels of risk and return potential, allowing investors to choose bonds that align with their investment goals and risk tolerance. Bonds can be used in combination with other investments, such as stocks and ETFs, to create a diversified portfolio that meets an investor's specific needs.