What is typically the primary motivation for investors to purchase bonds?

The primary motivation for investors to purchase bonds is to earn interest over time. When an investor buys a bond, they are essentially lending money to the issuer, which could be a government, municipality, or corporation. In return for this loan, the issuer agrees to pay the investor a fixed interest rate over the bond’s term, culminating in the return of the principal amount at maturity. This steady stream of interest payments, known as coupon payments, provides a predictable income for investors, which is particularly appealing for those looking for a stable return on investment.

Investors typically choose bonds when seeking a less volatile investment compared to stocks, as well as when they are looking for income generation or capital preservation. Bonds can serve as a key part of an investment strategy, particularly for those who prioritize income security, such as retirees.

In contrast, options such as gaining voting rights or influencing management decisions pertain primarily to equity securities like stocks, where shareholders have a say in company governance. Receiving shares is also related to equity ownership, which is separate from the fixed-income nature of bonds. Thus, the focus of bond investment is centered on interest earnings rather than active control or ownership rights in a company.