Bond

Definition

A bond is a debt investment. When you buy one, you are lending money to an issuer (like a government or company) in exchange for interest and eventual repayment of principal.

Key bond terms

• Face value: Amount repaid at maturity
• Coupon rate: Interest rate the bond pays
• Maturity: Date principal is repaid
• Yield: Return based on price paid and interest received

Why investors use bonds

Bonds can add income and potentially reduce portfolio volatility compared with an all-stock portfolio. They are commonly used in retirement and balanced strategies.

Main risks

• Interest-rate risk (bond prices often fall when rates rise)
• Credit risk (issuer may fail to repay)
• Inflation risk (future payments buy less over time)