Bonds

Financial bonds are debt securities through which an investor lends money to a company or public body.

Basically, when you buy a bond, you are lending money to the issuer, who promises to repay the principal at maturity and pay you periodic interest.

Practical Examples

• Government Bonds: For example, BTPs in Italy are bonds issued by the government to finance public expenditure.

• Corporate Bonds: Companies such as large multinationals may issue bonds to raise funds for investments or expansions.

Link with the Financial Market and the Stock Market Investment Diversification:

Bonds and stocks are two main types of securities in the financial market. While stocks represent ownership stakes in a company, bonds are loans that offer a fixed income.

Risk and Return: Generally, bonds are considered less risky than stocks and are chosen by those seeking stability and a steady flow of income. However, there is always a risk that the issuer will not be able to repay the debt.

Integrated Markets: In the financial market, bonds and stocks are traded together. Investors often combine both tools to balance their portfolio based on return goals and risk tolerance.

In summary, financial bonds represent a way to invest in loans to public or private entities, offering a balance between security and return within the broader financial market context.