Investing In Bonds? What Does That Even Mean?

When you buy a bond, you’re essentially loaning money to a government or a company. In return, they promise to pay you back the amount you invested, called the principal, after a certain period of time, known as the maturity date.

While you hold the bond, you also receive periodic interest payments, called coupon payments. These payments are typically fixed and are a percentage of the bond’s face value.

Bonds are considered less risky compared to stocks because they offer more predictable returns. However, it’s essential to consider factors like the creditworthiness of the issuer and prevailing interest rates, as they can affect the bond’s value and your overall investment.

In summary, investing in bonds means lending money to an entity and receiving regular interest payments until the bond reaches maturity, at which point you’ll get back the initial investment.