Bonds are essentially loans you make to governments or companies. In return, they promise to pay you back with interest after a set period. They’re generally less risky than stocks but offer lower potential returns.

Government bonds (like U.S. Treasuries) are considered very safe, while corporate bonds carry more risk but pay higher interest. Bond prices move inversely to interest rates – when rates rise, existing bond values typically fall.

Bonds provide steady income through interest payments and help balance stock market volatility. A mix of both in your portfolio can reduce overall risk while still allowing for growth.