Actually , a bond is loan borrowed by a supranational agency , a national government , a state, a municipality, or a large company. Who’s the lender? You, the investor, who is guaranteed a payment of the original investment plus interest (called the coupon). Most bonds are issued for a fixed term (called the maturity), which is usually longer than one year. To finance their activities, companies can raise money either by issuing stocks or by borrowing it from another entity .They can arrange the latter case by borrowing from a bank or issuing bonds.

Even though investing in bonds is less risky than investing in stocks, you should heed the following warnings:

• Bonds are not as easy to sell as stocks.
• Bond prices fall and flow with the market value – it is entirely possible for you to lose money if the bond’s principal value decreases.
• A good economy poses a threat to your bonds, as consumer prices are bound to rise. This is related to inflation.

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