Page Title Investing in Bonds Bond is a fixed income instrument that provides the bondholder with a regular interest payment, and repayment of the face value of the bond at maturity. So, this is very much like a Fixed Deposit, except that it is a tradable asset and there is a price attached to the bond at any one time. There is a complex formula to value the price of a bond. In fact, the price at the beginning is not equal its face value. Its value vary mainly to the movements in interest rates.
Bonds normally give a better return than banks do.
So in addition to the fixed interest paid out, there is a chance for capital appreciation. Bear in mind that this appreciation would not be as high as that for stocks. Most bond purchasers buy bonds for the sake of a stable and regular interest income and to diversify their investments. The amount of potential returns is a function of risk. Unlike bank deposit rates which are quite uniform, the riskier the bond, the better the potential returns.