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Bond
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A security through which you lend money to a government or company. You receive regular interest and get your money back at the end of the term. Considered lower risk than stocks.
A bond (Anleihe) is basically a loan that you give. You lend money to a state (government bond) or a company (corporate bond) and receive regular interest in return.
How it works: you buy a bond for €1,000 with a 3% coupon and a 5-year term. Every year you get €30 interest. At the end of the 5 years you get your €1,000 back. In total you have earned €150.
Risk: much lower than with shares, but not zero. If the issuer goes bust, you can lose money. German federal bonds are considered extremely safe; corporate bonds carry more risk.
Did you know? In March 2020, German federal bonds reached a negative yield of −0.85% – investors were effectively paying to lend money to the state.
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