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

Running yield

The annual interest payment (dividend) divided by the current market price of a bond.
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52-week high/low

The highest, or lowest, price a share has traded at in a passing year.
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Investment Trust

A company that pools money together from multiple investors and then invests it.
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Junk Bond

A form of debt investment that carries higher risk because of the likelihood that the issuer will default.
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Volatility

A measure of how much the prices of an asset or index vary over time.
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Value Investing

The art of buying shares which trade below their value, according to the analysis of the value investor.
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American Depository Receipt (ADRs)

Tradeable assets that let Americans invest in overseas stocks using US laws and dollars.
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Fundamentals

The data or information that is likely to impact a company's stock price.
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Interest Rate

The amount a lender charges for lending your money, or a borrower pays you for borrowing your money.
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