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A bond is a fixed-income investment where an investor lends money to a government, corporation, or other entity in exchange for periodic interest payments and the return of the principal amount at maturity. Bonds are considered low-risk compared to stocks and provide stable returns over time.
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Benefits of Bonds
Steady & Predictable Returns
Bonds provide fixed interest payments (coupons) at regular intervals, ensuring a steady income stream.
Lower Risk Compared to Stocks
Bonds are less volatile and carry lower risk than equities, making them ideal for conservative investors.
Capital Preservation
Government and high-quality corporate bonds protect your initial investment, reducing the risk of losing money.
Diversification
Adding bonds to your portfolio balances risk by offsetting stock market fluctuations.
Liquidity
Many bonds can be bought and sold in secondary markets, providing flexibility when you need cash.
Tax Benefits
Certain bonds, like tax-free government bonds and municipal bonds, offer tax exemptions on interest earnings.
Retirement & Safety
Bonds are great for retirement planning, offering stability and income for long-term financial security.