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Definition: An IOU from a government or company. In exchange for you lending them money, they issue a bond that promises to pay you back in the future plus interest (called the "yield").
TeenAnalyst Advice: Bonds are considered to be safer investments. Bonds issued by the government are the safest. Bonds issued by companies are not considered risk-free because the company may go bankrupt and be unable to repay its debts.If you're a young investor, the rule of thumb is that you can be more aggressive with your investments, which means owning more stocks. But as you grow older, you'll want to diversify into safer investments like bonds.
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First Preferred Stock