Review:
Bonds
overall review score: 4.5
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score is between 0 and 5
Bonds are a type of financial instrument used by governments and corporations to raise capital. They are essentially a loan from the bondholder to the issuer, with the promise of regular interest payments and repayment of the principal amount at a specified date.
Key Features
- Interest payments
- Fixed or variable interest rates
- Maturity date
- Credit rating
- Market liquidity
Pros
- Steady source of income through interest payments
- Relatively low risk compared to stocks
- Diversification of investment portfolio
- Liquidity in the secondary market
Cons
- Potential for default on interest payments or principal amount
- Interest rate risk if rates rise
- Lower potential for high returns compared to stocks
- Less flexibility than stocks in terms of buying and selling