Bonds
A loan you give to a government or company.
What it is
A bond is a loan: you get interest payments and your principal back at maturity.
Best for
Lower volatility and steadier returns than stocks (portfolio stability).
Watch for
Interest rate changes, inflation, and credit risk.
Quick take
- Bonds can smooth out portfolio swings.
- Prices usually fall when rates rise.
- Government bonds are typically safer than corporate bonds.
- Often held through bond ETFs/funds for diversification.
Key terms
- Yield: the return you earn (interest + price).
- Maturity: when the bond ends and principal is repaid.
- Duration: sensitivity to rate changes.
- Credit risk: chance the issuer can’t pay.
Pros
| Topic | Notes |
|---|---|
| Stability | Usually less volatile than stocks. |
| Income | Can provide regular interest. |
| Diversification | Helps balance stock-heavy portfolios. |
| Capital preservation | Often used for shorter timelines. |
Cons
| Topic | Notes |
|---|---|
| Rate risk | Bond prices can drop when rates rise. |
| Inflation risk | Fixed interest may not keep up with inflation. |
| Lower growth | Long-term returns often lower than equities. |
| Credit risk | Corporate bonds can default. |
Educational content only — not financial advice.