A Bond is a debt security issued by a company or government. It is like a loan from the Investor to the Issuer, with a set term and regular coupon(interest) payments from the Issuer. The regularity of the coupon payments is determined by the Issuer. Unlike a loan, the principal investment is returned to the Investor when the Bond matures. Bonds are recognised as a core component of any well-diversified portfolio, accessible to individuals, institutions, governments, or companies.

Different types of Bonds: 

  1. Fixed Rate Bond

A fixed rate bond offers fixed interest payments until maturity, when the principal is returned to the investor.

2. Floating Rate Bond

A floating rate bond offers variable interest payments, tied to an index (e.g. South African Prime Rate), until the principal is returned at maturity.