Bond

A bond is essentially a loan agreement. When you buy a bond, you lend money to the issuer—a government, municipality, or corporation—in exchange for regular interest payments (called coupons) and the return of your principal when the bond matures.

Bonds are generally considered less risky than stocks because their payments are contractually fixed. Government bonds from stable countries are among the safest investments available; corporate bonds offer higher yields in exchange for higher credit risk. Bond prices and interest rates move inversely—when rates rise, existing bond prices fall, and vice versa.

Investors use bonds to generate income, preserve capital, and reduce the overall volatility of a portfolio. They are a foundational component of balanced and conservative investment strategies.