Government Bonds: Stability in Your Portfolio

Government bonds are debt securities issued by a national government to support government spending and obligations. When you buy a government bond, you are essentially lending money to the government for a specific period of time at a fixed interest rate. These are widely considered among the safest investments because they are backed by the full faith and credit of the issuing sovereign nation.

In a well-diversified portfolio, government bonds serve as a crucial stabilizer against the higher volatility of the stock market. While they typically offer lower returns compared to equities, their primary value lies in capital preservation and the reliable stream of interest payments they provide. During periods of economic uncertainty, investors often flock to these "safe-haven" assets to protect their wealth.