Bond

A bond is essentially a loan you make to an issuer — a government, municipality, or corporation — in exchange for regular interest payments and the return of your principal at a set maturity date. Bonds are generally less volatile than stocks and provide income and stability to a portfolio.

Bond prices move opposite to interest rates: when rates rise, existing bonds with lower rates lose value, and vice versa. In a retirement portfolio, bonds cushion against stock-market swings and can fund early-retirement spending without forcing stock sales in a downturn, directly addressing sequence of returns risk.