Sovereign bonds for beginners

WHAT IS A GOVERNMENT BOND?

A sovereign bond is an IOU (I owe you) that you but from the government and then you get money (invested + interest rates) when the maturity expires. Usually, maturities are 3 months, 10 years and 30 years. This securities are known as the safest investments, especially if you invest in countries that are stable.

“Know what you own, and know why you own it.” — Peter Lynch

For example:

If you invest $1000, with a 3% interest rate and 10 years maturity. You will receive every 6 months (depending on the frequency they pay, it could be maybe every year) $30 dollars. When the maturity expires (after 10 years) you will get $1030 ($1000 that you invested + $ 30 interest rates)