My word, it’s a bond
When companies or governments need money, they often borrow — just as you might take a loan to pay college tuition or buy a car or a home. They could go to a bank, the way you probably would. But if there are investors with money to lend, companies might decide to issue bonds.
Small businesses typically get financing from their banks, but large companies who need access to millions or even billions of dollars will issue bonds to get access to more money, usually at lower cost than borrowing from a bank.
The list of bond issuers (borrowers) boggles the mind. Thousands of companies issue bonds as a regular part of doing business. So does the federal government (through the US Treasury), federal government agencies, and municipalities (which includes states, cities, counties and their agencies). And that’s just one country!
And the bond market is huge. The US Treasury alone issues bonds worth more than $4 trillion every year.
Bonds diversify a portfolio of stocks, stock ETFs and stock mutual funds. They put your money to work in a different way and react differently to what’s going on in the economy. So owning both asset classes helps reduce the risk of concentrating on just one.