A bond is a fixed-income instrument. You lend the issuer money for a set term; they pay you a stated coupon (interest) at regular intervals and return the principal at maturity.
Bond prices move inversely to interest rates. When rates rise, existing bonds paying lower rates become less valuable. Government bonds are considered the safest; corporate and high-yield ('junk') bonds pay more to compensate for higher default risk.
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Open Decision Lab →Frequently asked questions
Why hold bonds if stocks return more?
Bonds dampen portfolio swings and typically hold up better in recessions. They earn less over decades but provide stability that lets many investors stay the course.
What is a coupon rate?
The annual interest rate the bond pays on its face value, set when the bond is issued.