Bonds made simple

What is a bond?

A bond is essentially a loan, raised by a company or government, and financed by investors. The issuer promises to repay the loan at a future point in time – known as the maturity date. As for the investors (or bondholders), they will receive regular or ‘fixed income’ payments as well as the return of their original stake when the bond reaches maturity. The income an investor receives is called the ‘coupon’. There is no difference between the terms ‘bond’ and ‘fixed income’ – they both refer to the same form of investment.