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 debtholders, or creditors, of the issuer.
The volatility of bonds (especially short and medium-dated bonds) is lower than that of equities ( stocks ). Thus bonds are generally viewed as safer investments than stocks.
Bonds are often liquid – it is often fairly easy for an institution to sell a large number of bonds without affecting the price much.
Bonds are subject to risks such as interest rate risk, prepayment risk, credit risk, reinvestment risk, and liquidity risk.
In this summary video, Jack Bogle gave his advice about how to invest in the bond market.
Warning: This video is to show you John Bogle’s view about the bond market. Please do your research before doing any investment. A good balance between return and risk is the key to investment success.
Source: Finance Jane.
