Bonds are issued by governments and corporations when they want to raise money. By buying a bond, you're giving the issuer a loan, where they agree to pay you back the face value of the loan on a specific date, as well as paying you periodic interest payments along the way, usually twice a year.

Unlike stocks, bonds issued by companies give you no ownership rights. So you don't necessarily benefit from the company's growth, however, you shouldn’t see as much impact when the company isn't doing as well - as long as it still has the resources to stay current on its loans.

Bond, give you 2 potential benefits when you hold them as part of your portfolio:

They give you a stream of income.
They offset some of the volatility you might see from owning stocks.

Bond terms to know:

Coupon

This is the interest rate paid by the bond. In most cases, it won't change after the bond is issued.

Yield

This is a measure of interest that takes into account the bond's fluctuating changes in value. The simplest way to measure yield is the coupon of the bond divided by the current price.

Face Value

This is the amount the bond is worth when it's issued, also known as "par" value. Bonds are typically issued with a face value of £1,000.

Price

This is the amount the bond would currently cost on the secondary market.