A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rates. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors , of the issuer.
If history is any indication, stocks will outperform bonds in the long run. However, bonds outperform stocks at certain times in the economic cycle. It's not unusual for stocks to lose 10% or more in a year, so when bonds comprise a portion of your portfolio, they can help smooth out the bumps when a recession comes around. There are always conditions in which we need security and predictability. Retirees, for instance, often rely on the predictable income generated by bonds.
Sometimes bonds are just the only decent option. The interest rates on bonds are typically greater than the rates paid by banks on savings accounts. As a result, if you are saving and you don't need the money in the short term, bonds will give you the greatest return without posing too much risk.
People who want steady income from their investments, while preserving their principal, may include corporates in their portfolios.
Corporate bonds provide an opportunity to choose from a variety of sectors, structures and credit-quality characteristics to meet your investment objectives.
If you must sell a bond before maturity, in most instances you can do so easily and quickly because of the size and liquidity of the market.