Bonds

Bonds

Bonds are a type of debt security that represents a loan made by an investor to a borrower (typically a corporation or government). The borrower agrees to pay back the loan, plus interest, at a future date (the maturity date).

When you buy a bond, you are essentially lending money to the borrower in exchange for regular interest payments and the return of principal at the maturity date. The borrower uses the funds raised through the sale of bonds to finance various projects or activities.

Bonds are generally considered to be less risky than stocks, as they offer a fixed return in the form of interest payments. However, bonds do carry some risk, such as the risk of default (the borrower not being able to make the required interest or principal payments). The risk of default is typically higher for bonds issued by lower credit-rated borrowers, such as companies with a history of financial problems.

Bonds can be an important part of a diversified investment portfolio, as they provide a source of regular income and can help to mitigate the risk of investing in stocks. It is important to carefully consider your investment goals and risk tolerance before investing in bonds.