Bond: What Does It Mean?

A bond is a loan you make to a company or government in exchange for regular interest payments and the return of your original investment on a set date. That end date is called maturity, and the amount you get back is the bond's face value. The interest payments, often called coupon payments, are usually fixed, which is why bonds are known as fixed-income investments. Bonds generally carry less risk than stocks, though their prices move in the opposite direction of interest rates. Many investors use bonds to balance out the ups and downs of stocks in a diversified portfolio.