Definition
A bond has a face value, a coupon rate that sets the interest it pays, and a maturity date. Bond prices move opposite to interest rates: when rates rise, existing bonds with lower coupons fall in price.
How it is used
Bonds provide income and tend to be less volatile than stocks, which is why they are used to balance portfolios.
Watch out for
Bonds carry interest-rate risk and credit risk, the chance the issuer cannot pay.