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Bond
A loan to a government or company that promises payments under stated terms, while still carrying a chance of loss.
Example
You pay $100 for a five-year bond promising $4 each year and $100 at the end. Those are the agreed payments, but the borrower could fail or an early sale could return less.
How it fits in
A bond's price can fall when interest rates rise, the borrower becomes less trusted, or buyers become scarce. Inflation can also reduce what its payments buy, and currency changes can affect foreign bonds. A bond fund does not have one shared maturity date and can lose money as its holdings change. Compare the borrower, maturity, currency, sale conditions, fees, and whether the goal can wait for repayment.
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.