Investing · 4 min read
Bonds and Debt Instruments
A bond is a loan you make to a government or company in exchange for regular interest and return of principal at maturity.
Why it matters
Bonds add stability, income, and diversification to a portfolio dominated by equities.
Advantages
- Predictable income
- Lower volatility than stocks
- Capital preservation
Risks
- Interest-rate risk
- Credit/default risk
- Inflation erodes fixed coupons
Real-world example
A ₹1L 10-year government bond at 7% pays ₹7,000/year and returns your ₹1L at maturity.
Key takeaways
- Higher yield often means higher risk
- Ladder maturities to manage rate risk
- Government bonds are safest; corporate bonds vary widely
Quick quiz
1. When interest rates rise, bond prices typically: