Bond

By Greg Parsons, editor

Educational only, not financial advice.

A bond is essentially a loan. When you buy a bond, you're lending money to a government or company, which agrees to pay you interest (the coupon) and return your principal when the bond matures.

Why it matters

• Bonds are generally less volatile than stocks and are often used for stability and income.
• Bond prices move inversely to interest rates — when rates rise, existing bond prices generally fall.
• Not all bonds are equally safe — government bonds are typically lower-risk than corporate or high-yield bonds.

Simple example

• A 10-year government bond might pay a fixed interest rate (coupon) twice a year and return your original investment after 10 years.
• A broad bond ETF holds many individual bonds, spreading out interest-rate and credit risk.

How beginners use this

Most beginners access bonds through ETFs rather than individual issues. Start with bonds basics.

Related terms

• Bond Yield
• Duration
• Credit Risk

Learn more

• Bonds & Fixed Income
• Bonds Basics