What is a Bond?
When the government or cooperation wants to raise money they issue a bond. A bond represents debt to a company and a source of fixed income to an investor. Bonds are used by the government or a company to fund projects and operations. Bonds give you no ownership rights from the insurer’s company unlike stocks. Bonds give you a stream of income and can offset some volatility from stocks.
- Profit if you sell at a higher prices.
- Get all the principal back when making withdrawal at maturity.
- Income through interest gain.
Categories of Bonds
- Companies can default on the bonds
- Bonds pays lower than stocks
- Bonds yield can fall
Varieties of Bonds
A bond is sold by the governments and corporations and is a type of security. It’s a way for them to raise money from investors. The investor gets a guaranteed repayment of the principal and a flow of interest payments. There are categories of bonds such government bonds, cooperate bonds, municipal bonds, and agency bonds. Some varieties of these bonds include zero-coupon bonds, callable bonds, puttable bonds and convertible bonds.
Source: Mackenzie Investments, Investopedia, Fidelity
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