A bond is a fixed-income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are creditors of the issuer and receive interest payments at fixed intervals (such as semi-annually, annually, sometimes monthly) and the principal amount back upon the bond’s maturity date. Bonds are generally considered less risky than stocks but offer lower return potential. They play a critical role in financial markets, providing liquidity and a relatively safe investment option.
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Jenna Lofton, MBA is a stock trading and investment expert with over a decade of experience in the financial industry. She began her career as a financial advisor on Wall Street and now helps everyday investors make smarter financial decisions through StockHitter.com.
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