(LifeWire) - Definition: Bonds are simply a loan. You, the investor, are the lender. The company that sells you a bond is the debtor.
For example, if your bond says that Company B owes you 6% a year on your investment for 30 years, that is what you will be paid - even if Company B's profits soar and its stock price soars. On the contrary, if Company B's stock price shrinks, you will still get your 6% a year unless the company folds altogether.
Because of their steady income, bonds tend to have a stabilizing effect on investment portfolios, cutting down the highest highs and lifting the lowest lows.
