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GlossaryReference

Bond

A loan you give to a government or company in exchange for regular interest payments.

What Bond means

A bond is a debt investment: you lend money to a government or company, and they pay you interest for a set period, then return your principal at maturity. Bonds are generally considered lower-risk than stocks but historically have offered lower long-term returns. Bonds add balance to a portfolio, which is why many investors hold a mix of stocks and bonds based on their goals and tolerance for risk.

Example

Buying a 10-year government bond with a 4% coupon means you receive 4% of the face value in interest every year until the bond matures and the initial amount is returned.

Disclaimer

Definitions are simplified for educational use and are not personalized financial, investment, tax or legal advice.

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Frequently asked questions

They move in opposite directions. When new bonds offer higher rates, older bonds paying less become less attractive and their prices fall; when rates drop, older higher-paying bonds become more valuable. If you hold a bond to maturity you receive the principal back regardless, but price changes matter if you sell early or hold bonds through a fund.

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