Bonds – Explained simply

A bond is a type of financial investment that’s kind of like a loan. When someone buys a bond, they’re essentially lending money to a company or government, who is the borrower. In return for lending the money, the investor receives regular interest payments from the borrower and gets their original investment back at a later date.

There are different types of bonds, but they all have certain things in common. For example, they have a fixed interest rate, which means that the investor knows exactly how much they’ll earn in interest each year. They also have a maturity date, which is the date when the borrower has to pay the investor back the original amount they borrowed, plus any remaining interest payments.

Bonds can be a good investment for people who are looking for a more stable source of income, as they usually offer a higher rate of return than savings accounts or other low-risk investments. However, like any investment, bonds have risks, such as the risk that the borrower won’t be able to pay back the loan when the bond matures.

Bonds are bought and sold on financial markets, and their prices can go up or down depending on things like changes in interest rates or inflation. Because the bond market can be complicated, many investors choose to work with a financial advisor or use specialized tools to help them make informed decisions about investing in bonds.