Bonds often get compared with stocks although they are completely different. When you invest in a stock, you are becoming a part owner in the company; whereas with bonds, you are becoming a creditor. In short, with bonds you are investing in debt. Bonds are issued by corporations or governments and governmental agencies to raise money. They are basically borrowing the money from you are rewarded with a return.

The reason bonds get mentioned so much along with stocks is that they are often use to balance an investment portfolio. Bonds are typically lower risk than stocks, but they usually yield a lower return. Many investors who invest in the stock market will have a portion of their portfolio allocated to bonds.

There are a few different aspects to every bond:

1. The face value / par value of a bond is the amount of money that will be paid back to you at the time of maturity. When a bond is originally issued, it usually sells for face value. But, the face value does not represent the cost to buy the bond. The price to acquire a bond will fluctuate depending on different market conditions. If a bond is selling for more than face value, it is selling for a premium, and if it is selling for less than face value, it is selling at a discount.
2. Coupon. When you own a bond, you will earn interest. The coupon rate is the percentage of face value that you earn in interest every year. For example, if the face value is $1,000 and the coupon rate is 7%, then you will earn $70 in interest every year until maturity.
3. The maturity of a bond refers to a specific date in the future when you as the bondholder are returned the principal / face value of the bond.