Bonds areinstruments, which means they are a way of borrowing .
The entity 'issuing' the bond (i.e. selling the bond) pays back the money to the entity/purchasing the bond with some kind of .
Bond issuers are typically aor a government that wishes to raise money for a specific purpose.
The period they borrow the money for is usually a predetermined period (also called maturity), at a fixed interest rate (also referred to as a coupon of yield). Bonds are also commonly known as fixed-income.
If the entity that issues the bond is considered to be at high risk of defaulting on the repayments to the lender, then they will have to pay a higher interest rate than a less-entity would.
Bonds are graded in terms of how risky they are. The highest credit rating is AAA, meaning that the risk of defaulting is minimal. The lowest grade a debt instrument such as a bond can have is junk status. These bonds are called junk bonds.
Although bonds and stocks are both securities, they are different in that, as a shareholder, you own a part of a company, whereas as a bondholder, you only lend money.
As a form of, bonds can play an important role when building your . We recommend you to discuss your portfolio and investment strategies in our forum: