What is a Bond?

A bond is a financial asset that represents debt and is generally emitted by a company or a country to raise money for a specific purpose.

In exchange for lending money to the issuer, an investor receives an income by holding the bond, which includes the principal of the loan, as well as a fixed or variable interest payment.

A bond is a tradable asset that can be bought or sold once it has been issued.

How to calculate the value of a bond?

As a bond is a debt instrument, the emitter of the bond must repay this debt. The bond price is therefore the present value of its expected future cash flows.

How to buy a bond?

If you want to buy bonds, your can either choose to buy newly issued bonds or buy bonds on the secondary market. Here are some options :

  1. From your broker: Similar to stocks, you can buy bonds directly from your broker. Bonds are tradable assets, so you can buy them from other investors looking to sell those bonds.
  2. Using an ETF: Instead of buying bonds directly, you can buy bonds via Exchange-Traded Funds (ETFs). This will allow you to buy a certain basket of bonds and get exposure to some industries or countries. This is a good option to get immediate diversification. You can buy bond ETFs directly via the funds, or from your online broker.
  3. Directly from the government: You can for example buy US bonds directly from Treasury Direct. This option will allow you to avoid additional fees such as brokerage.

Ready to Become a Better Investor?

14-day Premium trial, 100% free after. No credit card required

No credit card required. Try Premium for free for 14 days. Cancel anytime