What is a bond?

Learn what a bond is

When governments and companies want to raise money, they’ll often do so by issuing bonds.

Bonds are effectively promissory notes. In return for buying bonds, investors will receive the money they put in back, plus interest.
Investors usually buy bonds because they promise a fixed return, in the form of interest, that is supposed to be paid back at one or several preset dates.

As the interest rate paid on bonds is usually fixed and pre-set, it’s common for bonds to be referred to as ‘fixed-income’ investments. Today, not all bonds have a fixed interest rate. Many are now issued with variable or floating interest rates, which change over time.

Deep dive: What are bonds and why investors buy them?

More terms

Inflation

The increase in the prices of goods and services over time, and the process by which money loses its value.
Read more

Leverage

A method of trading using borrowed money that usually involves a very high level of risk.
Read more

Money laundering

A method of moving money obtained illicitly through the financial system so it can be used legally.
Read more

United States Dollar (USD)

The famous greenback our friends in the US use as currency.
Read more

Professional Client

An investor that is able to meet several regulatory criteria.
Read more

52-week high/low

The highest, or lowest, price a share has traded at in a passing year.
Read more

Value Investing

The art of buying shares which trade below their value, according to the analysis of the value investor.
Read more

Base rate

What's the base rate?
Read more

Oligopoly

A situation in which a market or industry is controlled by a small group of companies.
Read more

You’re just minutes away from commission-free investing

When you invest, your capital is at risk