5. Bonds

bonds, debt securities, government bonds, corporate bonds, capital raising, interest payments, principal repayment, regular income, lower risk, capital preservation, lower returns, interest rate risk, bond price fluctuations, credit risk, issuer default, balanced risk, bond ETFs, diversified exposure

Overview: Bonds are debt securities issued by governments or corporations to raise capital, offering regular interest payments and principal repayment at maturity.

Benefits:

• Regular income through interest payments.
• Lower risk compared to stocks.
• Preservation of capital.

Risks:

• Lower returns compared to stocks.
• Interest rate risk: bond prices fall when interest rates rise.
• Credit risk: the issuer might default.

Tips:

• Invest in a mix of government and corporate bonds for balanced risk.
• Consider bond ETFs for diversified exposure.