- Steady Income: Bonds typically pay interest to their holders, which can provide a steady stream of income. This can be helpful for investors who are looking for a source of income to supplement their retirement or other financial needs.
- Safety: Bonds are generally considered to be a safe investment, as they are backed by the full faith and credit of the issuer. This means that the issuer is legally obligated to repay the principal amount of the bond and the interest payments.
- Capital Security: Bonds are generally considered less volatile than stocks, offering a more stable investment option for capital preservation.
- Diversification: Investors diversify across different asset classes such as stocks, bonds, real estate, commodities, and cash equivalents (like money market instruments). Each asset class reacts differently to economic and market conditions. Bonds, for instance, tend to perform differently from stocks during economic cycles. Bonds may offer income and stability, while stocks may provide growth potential but with higher volatility.
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