Bonds are a type of investment where an investor loans money to a company or government in exchange for regular interest payments and return of the principal investment at maturity. Bonds are often considered less risky than stocks and are used to diversify investment portfolios. The risk of default, or the issuer not paying back the principal, is higher for corporate bonds than for government bonds, and credit rating agencies can help gauge the financial strength of bond issuers. Interest rate risk is also a factor to consider, as a rise in interest rates can lower the value of a bond if sold before maturity. Before investing in bonds, it’s important to research and understand the risks involved.
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