What Is a Bond?

By Matthew DiLallo – Updated Aug 6, 2025 at 8:52 PM

Key Points

Bonds offer predictable income and can preserve capital if held to maturity.
Diversifying with bonds minimizes risk and balances stock market volatility.
Investors can buy bonds directly or through bond funds for easier management.

Bonds are debt securities that entitle the holder to receive interest payments. They're a type of loan made between businesses or government entities and investors. Bonds pay a specified interest rate (either fixed or variable) until they mature, and the issuing entity must repay the principal.

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Wooden tiles spelling out "bonds". — Image source: Getty Images

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Data source: Vanguard. Return data from 1929-2019.

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About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

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