A bond is essentially a loan made by an investor to a government, corporation or other organization. The issuer borrows money and agrees to pay interest, known as the coupon, at regular intervals, typically semiannually or annually, and to repay the principal, also called the face value or par value, when the bond matures. Bonds are considered fixed-income securities because they provide predictable income and are generally less volatile than stocks.
Bonds are a reliable investment option that provides steady returns and capital preservation, making them an essential component of a well-balanced portfolio. When you invest in bonds, you are essentially lending money to governments, corporations, or financial institutions in exchange for fixed interest payments over a specified period. This structured approach ensures predictable income and lower risk compared to equities, making bonds ideal for conservative investors or those seeking financial stability.
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