Bonds

Bonds are loans or debt instruments issued by governments, corporations or other borrowers to raise money. These instruments are issued for a stated period, during which interest payments are usually made to the bondholder. Bonds may be bought or sold, and may gain or lose value, but bondholders do not own or have rights to the borrower.

When you buy bonds, you are lending money to the bond issuer. Bonds are issued for a set period of time. At the end of that time, or at the bond maturity date, the bond issuer is required to repay the original loan amount (or the par value of the bond).

During the time between the issue date and the maturity date, interest payments are typically made by the issuer to the bond holder. The amount of these payments depends on the interest rate established by the bond issuer when the bond is sold. This rate is called a coupon rate.

What are the benefits to buying bonds?

Bond holders receive periodic interest payments plus the eventual return of principal. Bonds may also be bought and sold to other investors before maturity. Factors such as changing interest rates affect the value of a bond between the issue and maturity date.

Get the help you need

Talk with one of our Account Executives about whether bond investments may be right for your Plan portfolio. Investing involves market risks, including possible loss of principal. Bonds are subject to risks, including interest rate risk, inflation risk and credit risk.