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Bond
A loan you make to a government or company. They pay you fixed interest, then return your money on an agreed date.
Example
You buy a $100 bond that pays 4% a year for five years. Each year you get $4. At the end of year five you get your $100 back. Total received: $120. Steadier than stocks, but with less upside.
How it fits in
Bonds usually pay less than stocks but lose money less dramatically. They are the calmer half of a portfolio. The two main risks are the borrower failing to pay (credit risk) and rising interest rates pushing existing bond prices down (interest-rate risk). Both can be real, but for most government bonds in stable countries, they are small.
Where this is taught
Related terms
When the money you earn from saving starts earning its own money on top.
Interest paid only on the original amount, never on the interest you have already earned.
Needs are the things that keep you safe and well. Wants make life nicer. Mixing them up is what empties most budgets.