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Bond

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.
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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.
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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.

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

More terms

Stock Exchange

A physical/digital place where stockbrokers and traders can buy and sell securities.

Total Return

This is the measurement of a fund’s performance in a specific period.

Alpha

The percentage by which an investor outperforms a relevant benchmark.

Quick ratio

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Profit and Loss Statement (P&L)

A statement that summarises firm's expenses, costs, and revenues incurred during a time period. AKA income statement.

Rate of Return

Profit on an investment, expressed as a percentage of the investment.

Annualised Rate of Return

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

Bed & ISA

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American Depository Receipts (ADRs)

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

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