Bonds have a predetermined maturity date, at which the issuer repays the face value to the bondholder. Until maturity, bondholders receive regular interest payments, typically semi-annually or annually.
There are various types of bonds available in the market, including government bonds, corporate bonds, municipal bonds, treasury bonds, and high-yield bonds (junk bonds). Each type caters to different investor preferences and risk appetites..
Government bonds are considered low-risk and are used to finance public projects and manage budget deficits. Corporate bonds offer higher yields but come with varying degrees of risk.
Municipal bonds are issued by municipalities and local governments and are tax-exempt. They are used to fund infrastructure projects and public services.
Investing in bonds offers several advantages, such as stable income through regular interest payments, diversification for investment portfolios, capital preservation with low-risk bonds, and fixed returns through the coupon rate.
While bonds are generally safer than stocks, they still carry some risks, including interest rate risk, credit risk, and inflation risk