Investment Solutions

What is a bond?

A bond is a debt security, in which the authorised issuer – company, financial institution, or Government, offers regular or fixed payment of interest in return for the money borrowed by the said issuer. It is for a certain period of time

How do bonds work?

  • When you purchase a bond, the authorised issuer borrows money from you for a fixed period of time.
  • This money earns you a predetermined interest rate at regular intervals.
  • The principal amount is repaid at the end of the maturity period.

How are bonds different from stock?

  • Bond holders are lenders whereas stock holders are owners in the firm/organisation/company.
  • Bonds have a defined term of maturity while stocks have no fixed time period.