like you're 5
your friend borrows $10 and promises $1 a year plus the $10 back in five years. you're not an owner of anything — you're the lender.
use it in a sentence
“my target-date fund shifts toward bonds as i get closer to retiring.”
good to know
stocks make you an owner; bonds make you a lender. that's why bonds are usually steadier and usually earn less. bond prices fall when interest rates rise — which is why a bond fund can lose money in a year, even though the bonds themselves keep paying. in a portfolio they're ballast, not the engine.