What are bonds in simple terms?
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Bonds are debt securities that represent a loan made by an investor to a borrower, usually a corporation or government. When you buy a bond, you are essentially lending money to the borrower in exchange for regular interest payments, known as coupon payments, over the life of the bond. At the end ofRead more
Bonds are debt securities that represent a loan made by an investor to a borrower, usually a corporation or government. When you buy a bond, you are essentially lending money to the borrower in exchange for regular interest payments, known as coupon payments, over the life of the bond. At the end of the bond term, the borrower repays the original loan amount, known as the face value or principal.
In simple terms, bonds can be thought of as a type of investment where you lend money to a borrower in exchange for a fixed income over a specific period of time, with the expectation that the borrower will repay the loan in full at the end of the term.
Bonds are generally considered to be less risky than stocks, but also offer lower potential returns. They are often used as a way to diversify a portfolio and add stability to investments.