Guides · Stocks, ETFs and markets
What is a bond?
In short: A bond is a loan you make to a government or company, which pays you interest and then repays you on a set date. Usually less risky than stocks, but not risk-free.
How it works
Example: you lend $1,000 for 5 years at 3%: you receive $30 a year, then your $1,000 at the end, if the borrower doesn't default.
The link with rates
When rates rise, older bonds paying less lose value if you want to sell before maturity. That is what happened in 2022.
The risks
Borrower default, inflation eroding the interest, rising rates.