Basics of Bonds
Considered as the pillar of the financial industry, bonds are a main instrument used by investors looking for fixed income assets. A bond is essentially a loan given by an investor to a borrower usually a company or government.
The investor gets coupon payments—periodic interest payments—and the repayment of the principal amount upon bond maturity in exchange for lending their capital. See bonds as a huge pizza party to help you grasp them more readily. Every slice of pizza is a bond; when you invest in a slice, you are effectively lending money to the borrower—that friend—to purchase the ingredients. They pledge to cut a portion back to you over time, finally returning your original slice—or in other terms, your primary amount—in reward for your kindness.
