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Bond

A debt security where the issuer owes the holder payment.

A bond is a fixed-income debt instrument where the issuer borrows money from the bondholder and agrees to pay periodic interest (coupon payments) plus return the principal (face value) at maturity. Bonds are issued by governments, municipalities, and corporations. They are generally lower-risk than stocks and provide predictable income, making them suitable for conservative portions of a portfolio.

Example

A business owner invests $50,000 of company reserves in US Treasury bonds yielding 4.5%, earning $2,250 in annual interest income while preserving the principal for future use.

Why It Matters for Your Business

Bonds provide a way to earn returns on idle business cash with less risk than stocks, making them useful for cash reserve management.

Related Terms

Stock

More Investing Terms

Dividend

A distribution of profits to shareholders.

Stock

A share of ownership in a company.

Mutual Fund

An investment vehicle pooling money from many investors.

ETF

Exchange-Traded Fund - a tradable investment fund.

Portfolio

A collection of investments held by an investor.

Related Financial Guides & Resources

Accounting 101 GuideFinancial Statements GuideTax Deductions GuideFinancial Reports Feature

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