Bonds
Lend to a government or a company for a fixed term at a fixed rate of interest.
A bond is a loan you can trade. You pay in, receive interest (the coupon) on a set schedule, and get the face value back at the end of the term — provided the issuer can pay. In the meantime the bond’s price moves, mostly with interest rates.
Known schedule
Coupon dates and the maturity date are fixed when you buy.
Government and corporate
Bonds from states, public bodies and companies, in several currencies.
Sell before maturity
Bonds trade on exchanges, so you can sell before the end of the term at the market price.
What to look at
- Issuer and rating: who borrows your money and how likely they are to pay it back.
- Coupon and yield: the interest paid, and your return if you buy at today’s price and hold to maturity.
- Maturity: the longer the term, the more the price reacts to changes in interest rates.
- Currency: a bond in another currency adds exchange-rate risk.
Bonds carry two main risks: the issuer may fail to pay, and if interest rates rise, the price of your bond falls while you hold it.