Bonds. A source of regular income
What is a Bond?
Bonds trade
Bonds are a form of debt. Bonds are listed securities that are bought and sold on markets such as the London Stock Exchange.
You lend money to a company or a government for a set period of time, in exchange for regular interest payments.
Once the bond reaches maturity, the bond issuer returns your money.
Go here to find out what isn't a bond!
You can buy and sell bonds on the London Stock Exchange. They are designed to be liquid.
Just like shares, you can trade bonds so that if you need to sell for whatever reason (or buy), you can.
Don't confuse bonds with "fixed term bank deposits" that the banks call rather unhelpfully call "fixed-term bonds".
Fixed term deposits lock your money away unlike real bonds that can be traded.
Why buy bonds?
For income and portfolio risk reduction.
Investors buy bonds because they make known periodic payments that allow you to plan future cash flows.
The bond of a company is less risky than its equity. This is because debt holders must be paid before equity holders.
As part of a portfolio, equities provide growth and some income (via dividends) but neither can be planned for. Bond interest payments are known to the day and so they can be planned for.