Where the returns come from?
Bond returns stem from two primary sources: interest income and capital appreciation.
- Interest Income
Refers to the scheduled interest payments that bondholders receive periodically from the issuer as agreed upon.
- Capital Appreciation
Bond prices fluctuate based on factors such as market supply and demand and interest rate changes. If a bond's price rises and the bondholder chooses to sell before maturity, they can realize a gain from price appreciation. However, please note that if bond prices decline, selling the bond at that time carries the risk of incurring a loss.
