When you buy a bond, you’re lending your money to a company or a government (the bond issuer) for a set period of time (the term). The term can be anywhere from a year or less to as long as 30 years. In return, the issuer pays you interest income. On the date the bond becomes due (the maturity date), the issuer is supposed to pay back the face value of the bond in full (your original investment). There are different types of bonds you can invest in, or you can purchase a bond fund – a mutual fund or exchange-traded fund that invests in a number of different bonds. Before you consider investing in bonds, learn about the risks associated with this type of investment, and the factors that can affect bond prices.
Bonds can be purchased through a full-service investment firm which can place the order for you, or you can invest yourself by setting up an account online through a discount broker. Learn more about full-service investment firms and discount brokers. Bonds can be held in savings accounts, such as RRSPs, TFSAs or RESPs. Before you work with an investment firm, check that they are registered in your province or territory.