Bondholder

AAA

DEFINITION of 'Bondholder'

The owner of a government or corporate bond. Being a bondholder is often considered safer than being a shareholder because if a company liquidates, it must pay its bondholders before it pays its shareholders. Being a bondholder entitles one to receive regular interest payments, if the bond pays interest (usually semiannually or annually), as well as a return of principal when the bond matures.

INVESTOPEDIA EXPLAINS 'Bondholder'

Bonds are generally perceived as being low risk, but the level of risk is dependent upon the type of bond in question. For example, holding corporate bonds will yield higher returns than holding government bonds, but they come with greater risk. Bonds are also subject to interest rate risk, reinvestment risk, inflation risk, credit/default risk, liquidity risk and rating downgrades. An advantage of being a bondholder is that some bonds are exempt from federal, state or local income taxes.

VIDEO

Loading the player...
RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Cash Hoard

    A large amount of available money held by a company in anticipation ...
  3. Agency Cost Of Debt

    A problem arising from the conflict of interested created by ...
  4. Bond Valuation

    A technique for determining the fair value of a particular bond. ...
  5. Bond Rating

    A grade given to bonds that indicates their credit quality. Private ...
  6. Inflationary Risk

    The uncertainty over the future real value (after inflation) ...
RELATED FAQS
  1. How risky is it to enter into a debenture agreement?

    The risk of entering into a debenture agreement is dependent on the trustworthiness, and ultimately the financial viability, ... Read Full Answer >>
  2. How does inflation affect a company's short-term investments?

    Inflation marginally erodes a company's short-term investments. Short-term investments are typically ultra-safe liquid assets, ... Read Full Answer >>
  3. How is the risk-free rate of interest used to calculate other types of interest rates ...

    The risk-free rate for bonds is used for pricing the yield spread as the difference between the interest rate on a bond and ... Read Full Answer >>
  4. Which asset classes are the most risky?

    Equities is the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the ... Read Full Answer >>
  5. How do you find accrued interest on a bond?

    A bond is a debt instrument issued by a company, government agency or municipality to raise money. Interest payments are ... Read Full Answer >>
  6. What are the main disadvantages of fixed income securities?

    Fixed-income securities attract investors because they provide guaranteed returns in the form of fixed, regular cash payments. ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Bonds & Fixed Income

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  3. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  4. Bonds & Fixed Income

    Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.
  5. Investing Basics

    Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
  6. Bonds & Fixed Income

    The Importance Of Diversification

    Without this risk-reduction technique, your chance of loss will be unnecessarily high.
  7. Trading Strategies

    Are These the Top Monthly Dividend Stocks?

    Interested in monthly dividends? Here are two stocks to watch.
  8. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

    Understanding the pros and cons of bond funds and bond ETFs will help you choose the instrument that is best for building your diversified bond portfolio.
  9. Mutual Funds & ETFs

    Pros and Cons: Preferred Stock ETFs vs. Bond ETFs

    A look at the differences between preferred stock ETFs and bond ETFs and when you should invest in one over the other.
  10. Bonds & Fixed Income

    Understanding Negative Rates Of Europe's Central Banks

    We are currently seeing negative central bank deposit rates and government and corporate bonds with negative yields, but there are investors buying into these securities. Why?

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center