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

Exchange-Traded Fund (ETF)

A collection of investments, pooled into a single fund that can be bought and sold on a stock exchange.
Read more

S&P 500

Find out what is the definition of the S&P 500 index.
Read more

Volatility

A measure of how much the prices of an asset or index vary over time.
Read more

Year to Date (YTD)

A period of time that starts with the first day of the current calendar year and ends with today.
Read more

Net Income (NI)

The money a firm is left with from sales after subtracting taxes and different business costs.
Read more

Forward pricing

Mutual funds are traded on a forward pricing basis, meaning the price you see will be different to the price you may trade at.
Read more

Quick ratio

Learn what quick ratio stands for in financial terms and how to calculate it.
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

Junk Bond

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

You’re just minutes away from commission-free investing

When you invest, your capital is at risk