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

Annualised Rate of Return

The average annual return an investor sees over a set period of time.
Read more

Alpha

The percentage by which an investor outperforms a relevant benchmark.
Read more

Geometric Mean Return

A way of calculating compound returns on an investment or savings over a set period of time.
Read more

NYSE

The world's largest stock exchange. Wall St HQ.
Read more

Money laundering

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

Oligopoly

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

Packaged Retail and Insurance-based Investment Product (PRIIP)

An investment where, regardless of its legal form, the amount repayable to the retail investor is subject to fluctuations.
Read more

Yield to maturity (YTM)

What is yield to maturity and why is it useful?
Read more

Limit order

Learn what a limit order is and how to use it to make the most of your portfolio.
Read more

You’re just minutes away from commission-free investing

When you invest, your capital is at risk