Additionally why are they considered safer than stocks.
In: 6
You give the government $10 right now for some project they’re working on or want to work on and they hand you back a document that says they’re going to pay you back $12 five years from now. You essentially loaned them $10 and will collect 20% interest on that loan.
They’re safer than stocks because governments in developed countries don’t tend to disappear or run out of money. If I buy $10 worth of stock in a company and that company fails, my shares are now worthless and there’s no one left to pay me back. But the government of my country is always going to be there and always have money to pay back the loan.
While they are safer and pretty much guaranteed returns, it takes longer to get your money back and bonds also have much smaller potential profit. A stock can jump in value 10 or 20x in a very short time frame (such as GME) but it’s also way riskier.
Latest Answers