What Is a Bond?
A guide to understanding fixed-income bonds and how they are used within diversified portfolios.
Learn how bonds function, how they differ from other asset classes, and why they are commonly used in long-term financial planning strategies.
Find out more about
fixed income bonds
Find out more about
fixed income bonds
Disclaimer: This page is provided for educational purposes only and does not constitute investment advice, an offer, or a recommendation. Individuals should seek independent financial advice before making any investment decisions.
What Is a Bond?
A bond is a financial instrument where an investor lends money to an organisation - such as a company or government, for a fixed period of time.
In return, the issuer agrees to:
Pay interest over the life of the bond
Repay the original capital at maturity
When you purchase a bond, you are acting as a lender rather than an owner.
Unlike shares, which represent ownership in a company, bonds represent a loan agreement.
Unlike shares, which represent ownership in a company, bonds represent a loan agreement.
How Do Bonds Generate Returns?
Bonds typically provide returns in one of two ways, The exact structure depends on the issuer and the bond terms.
Fixed Income
Interest payments made at regular intervals (monthly, quarterly, or annually).
Compounding Structure
Interest that accumulates and is paid at the end of the bond’s term.
Where Do Bonds Sit
Within a Portfolio?
Bonds are often used as part of a diversified strategy because they can:
Provide predictable income
Offer defined timeframes
Introduce lower volatility compared to equities
Support capital preservation objectives
They are commonly viewed as sitting between cash savings and equities on the broader risk spectrum.
Types of Bonds
Corporate
Bonds
Issued by companies seeking capital to fund projects, expansion, or operations.
Government
Bonds
Issued by governments to fund infrastructure and public services.
Asset-Backed
bonds
Supported by underlying assets such as property, infrastructure, or commodities.
Thematic
Bonds
Including green or social bonds aligned with environmental or social initiatives.
Bonds in Context: A Comparison
With Other Asset Classes
Understanding how bonds differ from other asset types can help provide broader financial context.
01
Bonds
What it is
Your position
return source
volatility
Lending capital
Lender
Interest payments
Low - Medium
01
Bonds
02
shares
What it is
Your position
return source
volatility
Ownership in a company
Shareholder
Dividends + price movement
High
02
shares
03
property
What it is
Your position
return source
volatility
Physical asset
Owner
Rental income + appreciation
Medium
03
property
04
cash
What it is
Your position
return source
volatility
Bank deposit
Depositor
Savings interest
Low
04
CASH
Key Risks to Understand
All bonds carry risk. These may include:
Issuer default risk
Liquidity risk
Market interest rate risk
Capital loss risk
Inflation risk
Oakmount and Partners Limited, Thremhall Park, Start Hill, Bishops Stortford, Herts, CM22 7WE
Company Registration Number 07101464
Disclaimer: Oakmount and Partners Ltd is not authorised to provide financial advice or investment recommendations. We work only with self-certified High Net-Worth or Sophisticated Investors. Our services are not suitable for retail clients. All investment opportunities carry risk, including loss of capital, and are not covered by the Financial Services Compensation Scheme (FSCS) or Financial Ombudsman Service (FOS). Past performance is not a reliable indicator of future results. Seek independent financial advice before investing.
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CONTACT US
Asset-Backed Bonds
Gold-Backed Bonds
Green & Ethical Bonds
Social Housing Bonds
Oakmount and Partners Limited, Thremhall Park, Start Hill, Bishops Stortford, Herts, CM22 7WE
Company Registration Number 07101464
Asset-Backed Bonds
Gold-Backed Bonds
Green & Ethical Bonds
Social Housing Bonds
CONTACT US
Disclaimer: Oakmount and Partners Ltd is not authorised to provide financial advice or investment recommendations. We work only with self-certified High Net-Worth or Sophisticated Investors. Our services are not suitable for retail clients. All investment opportunities carry risk, including loss of capital, and are not covered by the Financial Services Compensation Scheme (FSCS) or Financial Ombudsman Service (FOS). Past performance is not a reliable indicator of future results. Seek independent financial advice before investing.
Continue Your Learning
If you would like a more detailed overview explaining:
How bond structures differ
The difference between fixed income and growth models
Questions to ask before considering bonds
Continue Your Learning
If you would like a more detailed overview explaining:
Who Uses Bonds?
Bonds are commonly used by:
Institutional investors
Pension
funds
Individuals seeking portfolio diversification
Family
offices
Experienced private investors
What Is a Bond?
A guide to understanding fixed-income bonds and how they are used within diversified portfolios.
Learn how bonds function, how they differ from other asset classes, and why they are commonly used in long-term financial planning strategies.
Disclaimer: This page is provided for educational purposes only and does not constitute investment advice, an offer, or a recommendation. Individuals should seek independent financial advice before making any investment decisions.
A bond is a financial instrument where an investor lends money to an organisation - such as a company or government, for a fixed period of time.
When you purchase a bond, you are acting as a lender rather than an owner.
Where Do Bonds Sit
Within a Portfolio?
Bonds are often used as part of a diversified strategy because they can:
They are commonly viewed as sitting between cash savings and equities on the broader risk spectrum.
Key Risks to Understand