Bonds 101: What investors need to know about the ‘shock absorber of the portfolio’

Many investors regard bonds as the frumpier cousins to stocks. Their prices rarely pop or plummet. They usually deliver a lower return, and—aside from a glamorous cameo in the 1980s thriller Die Hard—they are not part of popular culture in the same way as, say, GameStop or Tesla shares. They are, though, a critical part of any well-managed portfolio, and with the stock market looking particularly frothy, this may be more true than ever.

On their face, bonds are simple: An investor loans...