Summary
Corporate Bonds are debt securities issued by companies to raise capital from investors. When investors buy a corporate bond, they are effectively lending money to the company.
In return, the company usually pays interest and repays the principal amount when the bond reaches maturity.
Why it matters
Corporate bonds can provide regular income and may appeal to investors seeking predictable cash flows. They are different from shares because bondholders are creditors rather than owners of the company.
However, bonds still carry risk, including credit risk, interest rate risk, liquidity risk, and reinvestment risk.
How to read it
When reviewing a corporate bond, investors should consider price, yield, maturity, coupon, issuer credit quality, liquidity, and duration. A higher yield may indicate a more attractive return, but it may also reflect higher perceived risk.
Bonds should be compared based on both return potential and the issuer’s ability to meet its obligations.