What is a bond?
Shares swing with companies' prospects.
Ceridwen buys a short-term bond from a government with steady tax income. Why can it swing less than shares?
A strong borrower makes the agreed payments
The payments are set in the agreement, and steady tax income makes it very likely that they will be made.
Fixed payments from a strong borrower can make a short-term bond far calmer than shares.
A share’s price depends on what no one knows yet, such as future profits. A bondholder mainly waits to be paid as agreed.
The government guarantees its price
The bond can be sold at its market price, and that price can fall. The government’s strength lies in paying as agreed.
The amounts are too small to swing much
The size of a holding does not stop its price moving. A small investment can still gain or lose a large percentage.
Shares and bonds
Who is behind it
How a lesson is made
Every number in the lessons is either calculated or taken from a dated source. A lesson opens only after a person has reviewed it, and any change is reviewed again.
We teach you about money, but we never tell you what to buy. We don't sell investments or earn anything from your choices.
Sources
- ASIC: Bond risksThe guide explains bond agreements, repayment and trading, alongside the risks faced by lenders.
- UBS: Global returns researchHistorical returns and price swings across countries support the risk comparison. Future returns remain uncertain.