Understanding Bonds- And How They Can Help Your Portfolio - Bondsindia
A bond is an investment in which an investor loans money to an entity (usually a corporation or government) for a set time in exchange for regular interest payments. At the end of the loan term, the entity repays the principal amount of the loan. Bonds can provide a stable source of income for investors, as they typically offer a fixed interest rate paid regularly. They are also less risky than stocks, as they are backed by the issuing entity’s ability to repay the loan. Including bonds in your investment portfolio can help diversify your holdings and reduce overall risk. They can also provide a steady stream of income, which can be particularly beneficial for investors approaching retirement. It is essential to consider the issuing entity's creditworthiness, the loan term's length, and the interest rate when selecting bonds for your portfolio. Additionally, diversifying across different types of bonds , such as government and corporate bonds, can further reduce risk.