Bond
Candlefocus EditorBonds are debt instruments issued by corporations, governments, and other entities that require capital. The issuer of a bond is known as the debtor, while the bondholder is referred to as the creditor. Bonds are used by companies to raise the funds needed to finance their operations. They are issued at a fixed price (par value) and pay the bondholder interest, typically semi-annually, at a specified rate of return set by the issuer. Upon maturity, the bond issuer pays back the principal to the bondholder.
Bonds are one of the most popular fixed-income investments available. They are typically issued with a longer term (maturity), making them a better option for investors who are able to hold them for the duration of the term. This makes bonds attractive to investors who seek stability and a guaranteed rate of return. Bonds are also appealing to institutions and investors who are looking for a safe haven for their money and want a steady, predictable income stream.
Bonds are typically issued by corporations and governments. Corporate bonds, also known as corporate securites, are issued by companies or financial institutions and are typically categorized by creditworthiness. Investment grade bonds are issued by companies with higher credit ratings, such as triple A (AAA) rated entities, and offer lower yields. Higher-yielding bonds often have lower ratings, and typically have greater risk. Municipal bonds, also known as munis, are bonds issued by state and local governments. These bonds are often tax-free, meaning that the interest earnings are exempt from federal, state, and local taxes.
Bonds can be an attractive investment option depending on an investor’s individual needs and objectives. They can provide a consistent, predictable return during turbulent market conditions. Investors should however, be aware of the potential risks associated with investing in bonds and perform extensive research prior to investing.