Bonds are issued by corporations, as well as governments and their agencies, to raise money. When you purchase a bond, you lend money to the bond issuer. Bonds are known as fixed-income investments because they provide regular income through a fixed interest rate. Rather than lend money, investing in stocks means you own a part of a corporation. Common stock also gives you the right to vote as a partial owner of a company.
All investments carry some risk.
But the type and degree of risk vary. The greatest risks affecting bonds are credit risk and interest rate risk. Credit risk is the risk that the bond issuer will be unable to pay interest and repay principal. Credit quality of a bond is rated by independent rating agencies. Interest rate risk is the risk that the value of a bond will rise or fall as interest rates change.