Bonds are fixed-income securities that represent a loan made by an investor to a government, corporation, or other entity. In exchange for lending money, the bondholder receives regular interest payments (coupon payments) and gets the principal amount back when the bond matures.
Bonds are considered less risky than stocks because they provide steady income and have a defined repayment structure. However, bond prices fluctuate based on interest rates, inflation, and credit risk. Common types of bonds include government bonds (like U.S. Treasuries), municipal bonds, and corporate bonds. Some investors use bonds for portfolio diversification, income generation, and capital preservation, especially during market downturns. See also: Bond Yield