Financial Terms: What Are Bonds? Know the Benefits of Investing in Bonds, Types, and More

Bonds in Stock Market: Bonds are debt securities that represent an investor's loan to a borrower, which is usually the government or a corporation. In essence, when a person buys a bond, they are lending money to the issuer in exchange for periodic interest payments and the return of the principal amount upon maturity. There are various types of bonds, including fixed-rate bonds, floating bonds, zero-coupon bonds, convertible bonds, etc.

Investing in Bonds

Bonds generate a predictable income stream through regular interest payments. Bonds are also considered less volatile than stocks, which adds stability to an investment portfolio. Bonds also serve as a diversification tool, lowering overall risk exposure. Furthermore, they act as a hedge against inflation because many bonds have fixed interest rates that can outpace rising prices. You can buy bonds from financial brokers. Apart from this, you can also buy bonds in the form of stocks, mutual funds, or ETFs. There are many benefits of bonds like safety and security, rate of interest, fixed and diversification of your portfolio.